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A  TREATISE 


ON  THE 


LAW  OF 
PUBLIC  UTILITIES 

OPERATING  IN  CITIES  AND  TOWNS 


BY 

OSCAR  L.  POND,  A.M.,  LL.B.,  PH.D. 

[COLUMBIA] 

Member  of  the  Indianapolis  Bar 
Author  of  "Municipal  Control  of  Public  Utilities" 


INDIANAPOLIS 

THE   BOBBS-MERRILL  COMPANY 

PUBLISHERS 


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Copyright,  191 3 
By  Oscar  L.  Pond 


TO 
FRANK  J.  GOODNOW,  LL.D. 

EATON  PROFESSOR  OF  ADMINISTRATIVE  LAW  AND 

MUNICIPAL  SCIENCE 

COLUMBIA  UNIVERSITY 


^1 


TABLE  OF  CONTENTS. 


CHAPTER   I.— INTRODUCTION. 

CHAPTER    II.— THE    TWO    CAPACITIES    OF    MUNICIPAL.    COR- 
PORATIONS. 

SECrriON.  PAGE. 

1.  Powers   of  municipal   corporations 13 

2.  Classification   of   powers 13 

3.  Public  and   governmental  powers 14 

4.  No  liability  for  governmental   powers 16 

5.  Limitation    of    governmental    powers 18 

6.  Proprietary  business  powers 20 

7.  Liability  of  municipality 21 

8.  Powers  and  liability  determined  by  capacity 23 

9.  Municipal  public  utilities  a  business  concern 23 

CHAPTER    III.— CONSTRUCTION    OF    MUNICIPAL    CHARTERS. 

10.  Reasonable    construction 27 

11.  Power  and  discretion  lionited  only  by  fraud  or  abuse 27 

12.  Power   by   implication 31 

13.  Liberal   construction 33 

14.  Limitations  of  fraud  and  ultra  vires 36 

15.  Power  to  dispose  of  surplus  capacity 38 

CHAPTER  IV.— WHAT  ARE  MUNICIPAL  PURPOSES  WITHIN 
THE    MEANING    OF    THE    CONSTITUTION. 

16.  Providing  municipal   public  utilities  discretionary 45 

17.  Powers  of  municipal  corporations  fixed  by  construction 46 

18.  Liberal   construction    of   "municipal   purposes." 46 

19.  Municipal  public  utilities  as  "municipal  purposes." 47 

20.  Water-works  a  municipal  purpose 48 

21.  Electric  light   plant 49 

22.  Brooklyn   bridge 50 

23.  Rapid   transit   system 50 

24.  Public    memorial    monument 52 

25.  Power  to  lease  municipal  rapid  transit  system 52 

26.  Natural  gas  plant 54 

V 


VI  TABLE  OF   CONTENTS. 

SECTION.  PAGE. 

27.  Convention    hall 56 

28.  Public  wharves 57 

CHAPTER  v.— THE  IMPLIED  POWERS  OF  MUNICIPAL  COR- 
PORATIONS. 

29.  Power  to  provide  municipal  public  utilities  generally  im- 

plied    60 

30.  Best  Interests  of  municipality  the  test 60 

31.  Only  general  powers  expressly  given  by  statute 61 

32.  Statutory  power  to  provide  municipal  public  utilities  con- 
stitutional    61 

33.  Electric  light  plant 62 

34.  Steam  railroad  the  exception 63 

35.  Three  grounds  for  doctrine  of  implied  powers 63 

36.  The  police  power;  the  general  welfare;  municipal  purpose.  64 

37.  Increase  of  sphere  of  municipal  activity 64 

38.  Power  and  duty  to  provide  municipal  public  utilities 65 

39.  Electric  light  plant  by  virtue  of  police  power 66 

40.  Sewer  system  provided  under  police  power 68 

41.  Water- works    and    electric   lighting 69 

42.  The  general  welfare  clause  of  municipal  charters 70 

43.  Rapid  transit  systems  as  modern  conveniences 71 

44.  Modern  municipal  public  utilities  practical  necessities 73 

45.  Water-works  the  oldest  and  /most  necessary  utility 75 

46.  Supply  of  municipal  public  utilities  for  private  use 77 

47.  Joint  public  and  private  service 'more  economical 78 

48.  Ice     from     municipal     water-works,     an     economy     and 
necessity   78 

49.  Right  to  supply  private  service  by  implication  denied 80 

50.  Electric  light  service  one  of  the  most  modern 81 

51.  Detailed  statutory  provisions  of  Massachusetts  strictly  con- 
strued      84 

52.  The  rule  in  Illinois 86 

53.  The  New  Jersey  decision 87 

54.  The    California    rule    stated 87 

55.  Municipality  limited  to  enterprise  of  public  nature 90 

56.  Taxation   only   for  public   purposes 91 

57.  Municipal  public  utilities  public  and  natural  monopolies..  91 

58.  Private  enterprises  controlled  by  competition 92 

59.  Municipality   can    not   erect    opera   house 93 

60.  Brick   making   a   private   business 94 

61.  Sale  of  coal  and  wood  not  a  municipal  or  public  purpose..  94 

62.  Muncipality  can  not  assist  private  enterprise 95 

63.  Municipal  plumbing  not  incidental  to  its  water-works 98 


TABLE  OF  CONTENTS.  Vll 

SLCTION.  PAGE. 

64.  Municipal     coliseum     authorized     by     constitution — "home 
rule" 99 

CHAPTER  VI.— THE  CONSTITUTIONAL  LIMITATION  OF  MUNI- 
CIPAL  INDEBTEDNESS. 

65.  Municipal    indebtedness     101 

66.  A    precaution    against    improvidence 102 

67.  Distribution  of  cost  of  municipal  public  utilities 103 

68.  Indebtedness  defined  and  distinguished 103 

69.  Expense  of  plant  and  of  necessary  service  distinguished.  .105 

70.  Instalment    payment    purchase 107 

71.  Purchase   of  encumbered   property 107 

72.  Contract  obligations  payable  in   future 109 

73.  Encumbering  property  before  sale  to  municipality 110 

74.  Debts  payable  out  of  special  fund 110 

75.  Bonds  payable  from  revenue  of  plant Ill 

76.  "Mueller  law"  certificates   112 

77.  Purchase-price  payable  only  out  of  revenue  of  plant 113 

78.  Payment  same  as  by  "special  assessments" 114 

79.  Park-land  purchase  certificates    114 

80.  Option    agreements    of    purchase 115 

81.  Option    to   purchase    water-works 116 

82.  Purchase   of   water-works   by    piecemeal 117 

83.  Debt    accrues    as    service    is    furnished    under    serial    con- 
tracts         118 

84.  Necessary  service  payable  from  current  revenue 119 

85.  Debt  only  created   when   service  furnished 120 

86.  Current  service  payable  out  of  current  revenue 121 

CHAPTER  VII.— THE  FRANCHISE. 

87.  Grant  by  state  of  charter  right  to  be  a  corporation 123 

88.  Special  franchise  right  to  use  streets  and  operate  municipal 
public  utility    124 

89.  Power  to  grant  special  franchise  delegated  to  municipality. 124 

90.  Power  of  municipality  subordinate  to  state 125 

91.  Municipal    regulation    by   franchise   provisions 126 

92.  The   franchise   a  contract 127 

93.  Franchise  grants  on  acceptance  become  contracts 127 

94.  Rights  subject  to  public  regulation  and  control 128 

95.  Franchise  rights   available   to   inhabitants 128 

96.  Franchise    confers    special    privilege 129 

97.  Conditions    of    special    franchise    imposed    by    municipality 
binding 131 

98.  Inhabitants  may  enforce  franchise   provisions 133 


Vlll  TABLE  OF  CONTENTS. 

SECTION.  PAGE. 

99.  Special  franchise  necessary  to  use  of  general  franchise 134 

100.  Franchise    rights    of    inhabitant    and    nonresident    distin- 
guished   135 

101.  State  control  of  municipal  franchise  grants 136 

102.  Power    of    municipality    to    regulate 137 

103.  Franchise   rights  follow  growth   of  municipality 139 

104.  Rights  not  expressly  granted  are  reserved  to  municipality.  .142 

105.  Duty  of  municipality  in  granting  franchises 143 

106.  General  and  special  franchise  defined 144 

107.  Franchise  rights  protected  by  court  of  equity 144 

108.  All  franchise  rights  subject  to  exercise  of  police  power...  145 

109.  Franchise  grants  for  ber 'ifit  of  inhabitants  primarily 146 

110.  Granting  franchise  is  public  and  governmental 147 

111.  Municipal  conditions  must  be  reasonable  and  not  arbitrary.  148 

112.  State  interest  and  regulation  controls  municipal 149 

113.  Municipal  regulation  once  provided  is  final  and  binding. .  .151 

114.  Municipal  consent  when  accepted  creates  binding  contract.  152 

115.  Vested  interests  and  contract  rights  not  subject  to  impair- 
ment by  later  constitutional  provisions 153 

116.  Franchise  rights  may  be  modified  by  mutual  agreements.  .155 

CHAPTER  VIII.— NO  EXCLUSIVE  FRANCHISE  UNDER  IMPLIED 
POWER. 

117.  All  power   of  municipality  derived  from  state 156 

118.  No    implied    power    in    municipality    to    grant    exclusive 
franchises    157 

119.  Franchises   not   exclusive   to    avoid   monopolies 157 

120.  Duration   of   franchise    158 

121.  The  control  of  competition 158 

122.  Competitor  not  excluded  by  unauthorized  exclusive  fran- 
chises    160 

123.  Power  to  grant  franchises  strictly  construed 161 

124.  Monopolies  held   contrary  to  public  interest 161 

125.  Strict  construction  of  statutory  authority  excludes  implica- 
tion     162 

126.  Conditional     grants     of     exclusive     franchises     construed 
strictly    163 

127.  The  municipality  an  agent  of  the  state 164 

128.  Constitutional  provision  limits  grant  by  state 166 

129.  Municipal  control  of  streets  impaired  by  exclusive  fran- 
chises     168 

130.  Exclusive  franchise  prevents  municipal  control 169 

131.  Exclusive  franchise  held  unnecessary 170 


TABLE  OF   CONTENTS.  IX 

CHAPTER  IX.— NO  EXCLUSIVE  FRANCHISE  BY  IMPLICATION. 

SECTION.  PAGE. 

132.  Strict  construction  of  special  franchise  grants 172 

133.  Contract  of  franchise  can  not  be  impaired 172 

134.  Franchise   not  exclusive   subject  to  competition 173 

135.  Power  of  competition  to  destroy  franchise  rights 174 

136.  Municipality  not  excluded  unless  franchise  exclusive 175 

137.  Street  railway  limited  to  streets  actually  occupied 176 

138.  No  sale  of  franchise  to  highest  bidder  which  defeats  com- 
petition     177 

139.  Strict  construction   as  to  subject-matter   of  franchise 178 

140.  Rigid   enforcement  of  conditions  of  grant 179 

141.  Rights  of  street  railway  excl'Jsive  where  installed 180 

142.  Franchise  grants  subject  to  those  already  issued 181 

143.  Franchise  not  exclusive  excludes  all   without  franchise. .  .183 

CHAPTER    X.— CONTRACTS    OF    MUNICIPAL    CORPORATIONS 
FOR  PUBLIC  UTILITY  SERVICE. 

144.  Power  of  municipal  authorities  to  contract 186 

145.  Contract  for  service  not  exclusive  by  implication 187 

146.  Contract  not   exclusive   of   competition   or   municipality. .  .188 

147.  Wide  discretion  of  municipal  authorities 188 

148.  Exclusive   contract   for   reasonable   period 189 

149.  Contracts  with  municipal  and  private  parties  distinguished.  189 

150.  Power   of  municipality   detenmined   by   necessity 191 

151.  Exclusive   contract   formerly   denied   validity 193 

152.  Right  to  regulate  rates  to  be  conserved 194 

153.  Contract  executed  by  municipality  as  business  concern. .  .195 

154.  Contract    for    excessive    period    void 196 

155.  Contract  with  duration  not  fixed  is  optional,  not  perpetual.  197 

156.  Municipal  contract  not  exclusive  unless  expressly  made  so.  198 

157.  Impairment   of   franchise   rights   by   competition   not   pro- 
hibited     198 

158.  Contract  not  exclusive  to  preserve  competition 199 

159.  Contract  for  division  of  territory  among  competitors  void. 200 

160.  Exclusiveness   of   franchise   may   be   waived 201 

161.  Contract  limiting  service  to  exclude  competition  void 202 

162.  Contract    for    unnecessary    service    unreasonable    and    in- 
valid     204 

163.  Perpetual   contract   void    204 

164.  Contract    tending    to    exclude    municipality    strictly    con- 
strued    205 

165.  Municipality   may  exclude  itself  expressly 206 

166.  Municipality    excluded    by    exclusive    contract 207 


X  TABLE    OF    CONTENTS. 

CHAPTER  XL— DURATION  OF  FRANCHISE. 

SECTION.  PAGE. 

167.  State  can  grant  perpetual  franchise  if  constitutional 209 

168.  Municipal  franchise  not  perpetual  under  implied  power... 210 

169.  Construction    against    perpetual    franchises 210 

170.  Duration  of  municipal  grants  limited  to  retain  control. .  .211 

171.  Duration    not    expressly    fixed    varies 212 

172.  Duration  fixed  by  discretion  of  municipality 212 

173.  Duration    of    franchises    defined 213 

174.  General  or  special  franchise  of  state  may  be  perpetual. .  .214 

175.  Power  of  state  and  municipality  to  grant  perpetual  fran- 
chise   distinguished    217 

176.  Perpetual   franchise  generally   also   exclusive 218 

177.  Duration   of   franchise    limited   to   life   of   grantor 219 

178.  Duration   limited   to   life   of  grantee   to  retain   continuous 
control    221 

179.  Duration  of  franchise  strictly  construed  against  grantee.  .222 
ISO.     Duration  of  life  of  grantee  similar  to  grant  of  life  estate.. 223 

181.  Duration  of  franchise  and   service  contract   same 225 

182.  Duration  of  franchise  not  fixed,  optional \228 

183.  Franchise  for  excessive  period   entirely  void 229 

184.  Perpetual   franchise  upheld  as  such  for  reasonable  time.. 230 

185.  Franchise  limited  to  life  of  easement  in  street 282 

186.  Perpetual  franchise  under  New  York  decisions 233 

187.  Duration  of  franchise  limited  by  statute  in  New  York 237 

188.  Duration  of  franchise  of  state  on  acceptance  perpetual. ..  .239 

189.  Whether  unlimited  franchise  is  property  and  perpetual 240 

CHAPTER  XII.— FRANCHISE  RIGHTS  AVAILABLE  TO  INHABI- 
TANTS OF  MUNICIPALITIES. 

190.  The   obligation   of  the   municipal  franchise 242 

191.  The   duty   imposed   by  acceptance   of  franchise 243 

192.  Municipal  public  utilities  affected  with  public  interest 243 

193.  Regulation  and  control   of  municipal  public  utilities 244 

194.  Municipal  control  in  interest  and  for  benefit  of  public 244 

195.  Limitations   imposed  to  conserve  municipal  control 245 

196.  Rights  of  inhabitants  the  real  parties  in   interest 246 

197.  Individual    inhabitant's    rights     246 

198.  Right  of  consumer  failing  to  secure  proper  service 248 

199.  Franchise   rights   available  to  individual   customer 249 

200.  Nature  of  duty  to  provide  service  defined 250 

201.  Customer  may   enjoin   diversion  of  necessary  supply 251 

202.  Customer  entitled  to  service  under  most  favorable  condi- 
tions     252 

203.  Rights  of  abutting  property  owner 253 


TABLE  OF   CONTENTS.  XI 

SKtTlON.  PAGB* 

204.  Liability  of  municipal  public  utility  for  shade  trees 254 

205.  Right  of  customer  to  enjoin  collection  of  excessive  rate.. 254 

206.  Regulations   inconsistent   with   franchise   invalid 255 

207.  Liability   in  damages  for  failure  to  furnish  adequate  ser- 
vice     256 

CHAPTER    XIIL— NO    DISCRIMINATION    IN    SERVICE. 

208.  Impartial  service  the  measure  of  the  obligation 258 

209.  Municipal   public   utilities   natural   monopolies 259 

210.  Requirement   of  uniform  service  takes  the  place   of  com- 
petition     260 

211.  Enforcement    of    rights    by    individual    customer    imprac- 
ticable     260 

212.  Public  regulation  and  control  of  business  of  public  nature. 261 

213.  Discrimination   based   on   reasonable   classification 261 

214.  Individual  may  enforce  uniform  telephone  service 268 

215.  Municipal  public  utility  must  serve  public  granting  it  fran- 
chise     265 

216.  Uniform  service  to  all  of  class  and  of  similar  classes 265 

217.  Contract   for   exclusive   telephone   service    invalid 266 

218.  Value  of  service  to  customer  no  valid  basis  for  rate  clas- 
sification     267 

219.  Reasonable  regulations  for  securing  payment  for  service.. 268 

220.  Discontinuing    service    for    nonpayment    269 

221.  Discrimination    by    rebates    illegal 269 

222.  Rates  for  service  not  taxes  need  not  be  uniform  under  con- 
stitution      270 

223.  Discrimination    in   favor   of   public   or   charity 271 

224.  Inadequate    supply   no   justification    for   discrimination 273 

225.  Rule  necessary  to  protect  poorer  classes  especially 275 

226.  Suburban   customer  may  be   classified   as   such 275 

227.  Quantity   of  service  as  basis   of  classification 276 

228.  Classification   between  old  and  new  subscribers  invalid. .  .277 

229.  Nature  of  use  of  gas  service  not  proper  basis  of  classifi- 
cation     277 

CHAPTER    XIV.— LIABILITY    OF    WATER-WORKS    COMPANIES 
FOR  FIRE  LOSS. 

230.  The   consumer   the   real   party  Interested 2S0 

231.  The   inhabitant  may   enforce   franchise   rights 280 

232.  Franchise  or  contract  for  benefit  of  inhabitants 281 

233.  Liability  to  consumer  for  fire  loss   from   failure  of  water 
supply    283 

234.  Recovery   denied    for   duty   governmental 283 

?  Is 


Xll  TABLE  OF  CONTENTS. 

SECTION. 

235.  Right  of  municipality  to  recover  for  loss 284 

236.  Expediency    of    rule    refusing    recovery 285 

237.  Liability  to   customer  for   negligence 287 

238.  Recovery  by  consumer  in  contract  or  for  negligence 288 

239.  Recovery   by   consumer   as  taxpayer 290 

240.  Customer  not  municipality  real  party  in  interest  to  con- 
tract     291 

241.  Customer  party  to  contract  may  recover 292 

242.  Water-works    company    not    insurer 293 

243.  Duty   under  franchise  to   supply   virater 294 

244.  Owner  of  property  only  party  who  can  sue  for  loss 295 

245.  Beneficiary  of  contract  may  sue  for  its  breach 296 

246.  Consideration   furnished   by   beneficiary 297 

247.  Liability  for  fire  loss  contemplated  by  contract 298 

248.  Contract  expressly  assumes  risk  of  fire  loss 299 

249.  Reasons    for    denying   recovery    stated 300 

250.  Recovery  held  not  in  contemplation  of  parties 301 

251.  Recovery  denied  for  want  of  privity  between  parties 302 

252.  No  recovery  not  expressly  provided  for  in  contract 303 

253.  Duty   governmental    and    no    liability 304 

254.  Water-works  company   subrogated   for  municipality 305 

255.  Recovery  denied,  although  expressly  stipulated  by  contract. 306 

256.  No  recovery  contemplated  in  fixing  rates 307 

257.  Impracticable  to  permit  recovery 308 

258.  Liability  would  require  prohibitive  rates 309 

259.  Contract  only  with  municipality  to  furnish  water  for  fire 
protection     310 

260.  Express  contract  for  water  service  for  fire  protection  neces- 
sary     311 

261.  Rates  for  service  indicates  no  liability  for  fire  loss  con- 
templated     312 

262.  Interest  of  taxpayer  and  consumer  in  contract  only  inci- 
dental        313 

263.  Recovery  only  by  party  to  contract  expressly  stipulated. .  .314 

CHAPTER    XV.— NEGLIGENCE    OF    MUNICIPAL    PUBLIC 
UTILITIES. 

264.  General   liability  for  negligence    317 

265.  Municipality  liable  for  negligence  except  act  governmental .  318 

266.  Municipality  not  liable  in  providing  fire  protection 321 

267.  Municipality  liable  in   furnishing  water  privately 322 

268.  The   two   capacities   of   municipal    corporations 323 

269.  Liability    under    municipal    ownership 324 

270.  Liability  under  commission 325 

271.  Municipality  liable  for  damage  from  broken  water  main., 326 


TABLE  OF  CONTENTS.  ^m 

SECTION.  PAGE. 

272.  Municipality  liable  for  water- works  same  as  for  streets 327 

273.  No  liability  under  statute  where  duty  partly  governmental. 327 

274.  No  liability  for  public  duty  which  is  not  commercial  enter- 
prise   328 

275.  Liability  for  negligent  maintenance  of  water-works  prop- 
erty          329 

276.  Liable  only  for  ordinary  use  of  water 330 

CHAPTER    XVL— MUNICIPAL    PUBLIC    UTILITY    SYSTEMS    AS 
ADDITIONAL   SERVITUDES. 

277.  Equipment  of  municipal  public  utilities  in  highways 3:i3 

278.  Public  purposes  for  which  highways  dedicated 333 

279.  Purposes  include  communication  and  transportation 334 

280.  Purposes  not  limited  to  those  contemplated  at  dedication.  .335 

281.  Equipment  for  local  service  no  additional  servitude 335 

282.  Street  railways  and  pipe  lines  local  not  additional  servi- 
tudes        336 

283.  Interurban    railway    system 337 

284.  Tendency  to  extend  municipal  utility  service 337 

285.  Streets  and  other  highways  not  distinguished 338 

286.  Expedient  to   encourage   extensions 338 

287.  Decisions   conflicting    339 

288.  Communication  by  wire  in  lieu  of  travel 340 

289.  Public   use   not  additional   servitude 343 

290.  Public   rights   paramount   after   dedication 344 

291.  Public  entitled  to  underground  use  of  streets 345 

292.  Travel   in  streets  relieved   by  telephone 345 

293.  Lighting  system   no   additional   servitude 347 

294.  Modern  improvements  included  in  "public  purpose" 348 

295.  Necessary    underground    conduits   included 349 

296.  Streets   and   other   highways   formerly   distinguished 350 

297.  Distinction    no    longer    obtains 351 

298.  Steam,  street  and  interurban  railways  distinguished 353 

299.  Interurban    railway   no   additional   servitude 354 

300.  Telephone  lines  additional  servitudes  in  Illinois 355 

301.  Light  being  necessity  is  not  additional  servitude 356 

302.  Telephone  system  held  additional  servitude  in  New  York.. 357 

303.  Street   railway    system   held   additional    servitude   in    New 
York    358 

304.  Underground  rapid  transit  system  additional 359 

305.  Telegraph  and  telephone  compared 360 

306.  Telephone  new  method  of  subjecting  streets  to  old  use 361 

307.  Use  for  public  and  private  service  distinguished 362 

308.  Nature  of  use  generally   not  distinguished 363 

309.  Street  and  rural  highway  not  distinguished  for  telephone. 364 


XIV  TABLE  OF  CONTENTS. 

SECTION.  PAGE. 

310.  Tendency  of  decisions  progressive  and  practicable 366 

311.  Modern  inventions  for  or  in  lieu  of  travel  included  in  pub- 
lic  purposes    368 

312.  Conservative  decisions  find  additional  servitudes 368 

313.  Original  dedication  made  the  test 370 

314.  Ownership  of  fee  in  street  not  considered 372 

315.  Interurban  in  rural  highway  held  additional  servitude 373 

CHAPTER    XVII.— EXEMPTION    FROM    TAXATION    OF    PROP- 
ERTY SUPPLYING  MUNICIPAL  PUBLIC  UTILITIES. 

316.  Municipal   ownership   facilitated   by  tax  exemption 376 

317.  Power  to  tax  under  federal  constitution 376 

318.  Taxation    under    state    constitutions 376 

319.  Municipal    property    used    for    governmental    and    private 
purposes    377 

320.  Public  governmental  property  not  taxed   377 

321.  Municipal  public  utility  property  of  municipality 378 

322.  Public  purpose  entitles  such  property  to  exemption 378 

323.  Power  to  produce  revenue  not  the  proper  test 379 

324.  Nature  of  purpose  not  changed  by  income  received 380 

325.  "Municipal  purpose"  defined 381 

326.  Present  use  must  be  public 382 

327.  Water-works  a  public  purpose 382 

328.  Purchased  by  taxation  and  under  eminent  domain 383 

329.  Property  beyond  limits  of  municipality  may  be  taxed 384 

330.  Such  property  only  taxable  by  statutory  provisions 385 

331.  Property  exempt  for  ownership  and  purpose  public 387 

332.  Payment  for  service  same  as  payment  of  taxes 388 

333.  Kentucky  rule  as  to  municipal  property 388 

334.  Distinction  between  public  and  governmental  property  in- 
valid        389 

335.  Municipal  water-works  under  Kentucky  rule 389 

336.  Limitation  denying  right  to  sell  for  nonpayment  of  taxes. 392 

337.  Statute  taxing  property  producing  income  in  Pennsylvania. 395 

338.  Property  providing  private  service  taxed  in  Vermont 396 

339.  Property   of  private  parties  taxable 397 

340.  Contract   of   municipality   to   exempt   such   property   from 
taxation     397 

341.  Contract  treated  as  payment  for  public  service 398 

342.  Consideration  of  such  contract  must  be  reasonable 399 

343.  Contract  not  in  effect  an  exemption 400 

344.  Strict  construction  denies  validity  of  agreement 401 

345.  Practical  statement  of  the  rule 402 


TABLE  OF  CONTENTS.  XV 

CHAPTER   XVIII.— SALE   OF   PROPERTY    PROVIDING   MUNICI- 
PAL PUBLIC  UTILITIES. 

SECriO.V.  PAGE. 

346.  Municipal  control  by  limitation  on  alienation 403 

347.  Attitude  of  courts  on  municipal  control  and  ownership. .  .404 

348.  Trust  property  devoted  to  public  use  can  not  be  sold  with- 
out  statutory   authority 404 

349.  Duty  to  render  service  personal 405 

350.  Alienation  of  property  permitted  in  public  interest 406 

351.  Municipal  water-works  public  property  like  parks 408 

352.  Municipality  trustee  for  public  of  its  water  and  light  plant. 409 

353.  Transfer  of  property  by  lease  must  be  authorized  by  stat- 
ute        410 

354.  Duty  to  serve  public  can  not  be  evaded  by  alienation 411 

355.  Municipal  ownership  conserved   for  public  interest 412 

356.  Public  interest  and   private  gain  antagonistic 413 

357.  Abanctoned  property  may  be  alienated  by  municipality 414 

358.  Pipe   lines   on   failure   of  gas   may   be  alienated   in   public 
interest    414 

359.  Transfer  to  municipality  favored  in  interest  of  public 416 

360.  Municipal  option  to  purchase  provided  in  franchise 417 

361.  Legislative  authority  must  be  express  to  permit  transfer.  .417 

362.  Franchise  personal  to  grantee  and  not  transferable 418 

363.  Combination  agreements  defeating  competition  are  invalid. 419 

364.  Contracts  fixing  rates  or  combining  competitors  invalid. .  .420 

365.  Stock  control  of  competing  concerns  invalid 421 

366.  Forced  sales  of  such  property  also  prohibited 422 

367.  Right  of  alienation  expressly  given  by  statute  valid 423 

CHAPTER   XIX.— RIGHTS    ON    EXPIRATION    OR    FORFEITURE 
OF  FRANCHISE. 

368.  Property   not  forfeited   with   franchise 424 

369.  Right  to  retake  possession  coupled  with  property 425 

370.  Practical    disposition    of   property    on    expiration    of    fran- 
chise        425 

371.  Property  and  franchise  rights  may  be  forfeited  by  agree- 
ment        426 

372.  Forfeiture  for  nonuser  after  reasonable  time 427 

373.  Nonuser  resulting  in  forfeiture  reopens  field 429 

374.  Trespasser  If  necessary  franchise  not  secured 430 

375.  Franchise  rights  must  be  accepted  in  reasonable  time 431 

376.  Acceptance   of  franchise  and   rendering  service   necessary. 432 

377.  Forfeiture  follows  failure  to  perform  if  statute  self-execut- 
ing         433 

378.  Forfeiture  waived  and  substantial  performance  sufficient.  .434 

379.  Provisions  of  municipal  franchise  modified  by  agreement.  .436 


XVI  TABLE  OF  CONTENTS. 

SECTION.  PAGE. 

380.  Title  to  property  not  affected  by  expiration  of  franchise. .  .437 

381.  Right  to  retake  property  necessary  to  enjoy  its  ownership. 438 

382.  Plant  should  not  be  dismantled  but  transferred 440 

383.  Franchise  renewed  or  plant  purchased  by  municipality 441 

384.  Right  to  remove  equipment  on  forfeiture 442 

385.  Trespasser  on  expiration  regardless  of  investment  in  Ohio. 444 

386.  Impracticable  to  treat  as  trespassers  on  expiration  of  fran- 
chise        445 

387.  Agreement  express  for  revocation  and  removal 446 

388.  Municipality  must  purchase  or  renew  if  franchise  requires. 447 

CHAPTER     XX.— STREET     AND     HIGHWAY     PRIVILEGES     OF 
MUNICIPAL  PUBLIC  UTILITIES. 

389.  The  street  the  key  to  regulation 449 

390.  Streets  for  use  and  benefit  of  public 450 

391.  Duty  and  opportunity  of  municipal  officers  to  conserve  pub- 
lic   interest     450 

392.  Control  of  streets  delegated  to  municipality 451 

393.  Municipal  consent  to  use  of  streets  conditioned  on  service. 451 

394.  Power  delegated  to  municipality  legislative 452 

395.  All  rights  subject  to  exercise  of  police  power 452 

396.  Equipment  in  streets  subject  to  removal  or  change 453 

397.  Street  privileges   and  police  power  defined 454 

398.  Public  control  of  streets  and  franchises  complete 455 

399.  Municipal  control  of  streets  delegated  by  state 457 

400.  Power  must  be  expressly  or  clearly  delegated 458 

401.  Delegated  power  may  be  revoked  or  modified  by  state 460 

402.  Streets  dedicated  in  trust  for  benefit  of  public 461 

403.  Title  to  street  in  municipality  trustee  for  public 462 

404.  Municipal   consent   condition   precedent 463 

405.  No  exclusive  use  unless  expressly  provided 463 

406.  No  power  to  alienate  or  obstruct  streets  implied 464 

407.  Telephone  and  telegraph  not  limited  by  local  control 465 

408.  Municipal  control  limited  to  municipality 466 

409.  Power  to  grant  perpetual  franchise  not  implied 467 

410.  Change  of  street  grade  requiring  relocation  of  pipes  valid. 469 

411.  Sewer  systems  paramount  to  public  utility  pipes 471 

412.  Arbitrary  exercise  of  police  power  not  sustained 472 

413.  Municipality  can  not  barter  away  right  to  exercise  police 
power    473 

CHAPTER  XXI.— THE   RIGHT   TO   FIX   RATES. 

414.  Property  devoted  to  public  use  subject  to  public  regulation 
and    control    476 


TABLE  OF  CONTENTS.  XVll 

SECTION.  PAGE. 

415.  Control  of  state  over  its  corporations 477 

416.  Regulation  of  rates  for  municipal  public  utilities 478 

417.  Competition   not   sufficient  regulation 478 

418.  Delegation  of  power  of  regulation  must  be  clearly  intended  479 

419.  Power   of   municipal    regulation   governmental,   continuous 
and   personal    479 

420.  Municipal   regulation   from  control  of  its  streets 480 

421.  Control    as    condition    of    granting    municipal    consent    or 
franchise    480 

422.  Power  of  municipal  regulation  plenary  and  complete 481 

423.  Municipal  ordinance  fixing  rate  is  binding 483 

424.  Rate  regulation  suspended  by  contract  fixing  rate 484 

425.  Municipal  officers  competent  to  fix  rates  and  disinterested. 485 

426.  Express  contract  for  reasonable  period  fixing  rates  is  valid. 486 

427.  Power  to  contract  gives  power  to  fix  rates  until  revoked. .  .487 

428.  Power  to  grant  municipal   franchise  rights   on   conditions 
construed    liberally    487 

429.  Individual   inhabitant  can  enforce  franchise  rights 488 

430.  Municipal   grant   of  monopoly   rights   may   be   conditioned 

on    control 489 

431.  Acceptance    of    municipal    consent    on    conditions    creates 
binding    contract    489 

432.  Service  must  be  provided  according  to  terms  of  contract.  .490 

433.  Failure  of  municipality  to  provide  rate  in  franchise 491 

434.  Regulation  of  streets  not  authority  to  regulate  rates  dur- 
ing   franchise     493 

435.  Power   of  municipality  to  regulate   rates  not   provided   in 
franchise — Police  regulations    494 

436.  Power  to  contract  and  to  regulate  distinguished 497 

437.  Rates  fixed  by  agreement  of  parties  binding 498 

438.  Limitation   of  police   power 504 

CHAPTER   XXIL— RATES   MUST   BE   REASONABLE. 

439.  Reasonable  rates  the  ultimate  object 506 

440.  Fixing  rates  legislative  and  administrative 507 

441.  Rates  should  vary  with  changed  conditions 507 

442.  Reasonableness  of  rate  a  judicial  question 508 

443.  No  return  on  investment  guaranteed 509 

444.  Value  of  service  a  test  of  reasonableness 509 

445.  Rates   for  future   fixed   by   contract   or   legislature   not  by 
courts    511 

446.  Rate  presumed  reasonable   512 

447.  Reasonableness  of  rate  question  of  fact 513 

448.  Limitation   of  reasonableness    515 

449.  Question  of  reasonableness  raised  by  either  party 515 


XVlll  TABLE  OF  CONTENTS. 

SECTION.  PAGE. 

450.  Discretion  of  parties  fixing  rates  respected  unless  abused.. 517 

451.  Municipal  public  utility  fixing  rates  must  be  reasonable.  .518 

452.  Cost  of  service  includes  measuring  it  for  customer 518 

453.  Reasonable  value  of  service  determines  the  rate 520 

454.  Risk  of  investment  assumed   by   owner 521 

CHAPTER  XXIII.— WHAT  CONSTITUTES  REASONABLE  RATES. 

455.  Reasonable  rate  question  of  fact  varying  with  conditions.  .524 

456.  Elements  to  be  considered  in  fixing  rates 525 

457.  Antagonistic  interest  of  parties  and  sliding  scale  of  rates.. 526 

458.  Element  of  risk  of  investment  affecting  rates 526 

459.  Expense  of  maintenance  and  operation 527 

460.  Physical  depreciation  and  obsolescence 527 

461.  No  element  of  good  will  unless  competition  in  field 528 

462.  Going  concern  with  established  income 529 

463.  Sliding  scale — Increased  earnings  with  decrease  in  rates.. 529 

464.  Monopoly  eliminates  element  of  risk 531 

465.  Rate  increased  with  element  of  risk 533 

466.  Fixed  charges  and  maintenance  expense  and  dividends 534 

467.  Obsolescence  and  physical  depreciation  operating  expense. 534 

468.  Functional  and  physical  depreciation  charged  to  operation 
not  added  to  capital  account 537 

469.  Replacements  out  of  earnings 537 

470.  Account  earnings  rather  than  capital  for  replacement  no 
increase    538 

471.  Competition  affects  volume  and  risk  of  business 539 

472.  No  good  will  under  monopoly  for  no  choice 540 

473.  Established  business  of  going  concern  with  fixed  income.. 541 

474.  Reproduction  cost  ignores  going  concern  value 541 

CHAPTER  XXIV.— VALUATION  OF  THE  INVESTMENT. 

475.  Basis  for  fixing  rates  and  purchase-price 544 

476.  Fair  return  on  reasonable  value  of  necessary  property 545 

477.  Four  theories  for  ascertaining  valuation 545 

478.  Original   cost  if  not  excessive 546 

479.  Reproduction  less  depreciation   547 

480.  Capitalization  and  investment  distinguished 547 

481.  Power  and  necessity  of  controlling  capitalization 547 

482.  Connection    between    capitalization    and    necessary   invest- 
ment not  always  apparent 548 

483.  Tendency  to  regulate  issue  of  stocks  and  bonds 549 

484.  Present   value   true   test 549 

485.  Theories  of  valuation   considered 551 

486.  Valuation  as  of  the  time  question  determined 553 


TABLE  OF  CONTENTS,  XIX 

SECTION.  PAGE. 

487.  Present  value  as  a  going  concern 553 

488.  Market  valuation  or  capitalization  inadequate 554 

489.  Present  actual  physical  valuation  as  going  concern 555 

490.  Franchise   valuation — real   or   cost 556 

491.  Valuation  limited  to  property  being  used  for  public 557 

492.  Rate  presumed  reasonable — effect  of  reduction  on  income.. 558 

493.  Elements  of  valuation  as  evidence  of  true  value 558 

494.  Current  market  price  and  rate  of  interest 559 

495.  Net   earnings   rule    561 

496.  Limitations  and  additions  necessary  to  this  rule 561 

497.  No  constitutional  right  to  unreasonable  return 562 

CHAPTER     XXV.— REGULATION     BY     MUNICIPAL     CORPORA- 
TIONS. 

498.  Governmental  power  to  regulate  rates  suspended  by  con- 
tract        564 

499.  Municipal  control  practical  and  power  delegated  adequate. 565 

500.  Tendency  to  increase  municipal  control  of  real  party  in  in- 
terest       566 

501.  Persistent  vigorous  enforcement  of  franchise  essential 567 

502.  Strict  construction  of  contracts  suspending  power  to  regu- 
late        567 

503.  Power  to  regulate  and  to  fix  rates  by  contract  distinguished. 568 

504.  Power  to  fix  rates  must  be  exercised  in  manner  provided.  .569 

505.  Power  to  regulate  rates  to  be  conserved 570 

506.  Rate  regulation  and  the  general  welfare 570 

507.  Power  to  fix  rates  may  be  delegated  to  municipality 572 

508.  Policy  of  local  control  over  purely  local  matters 573 

509.  Municipal    authorities    competent    to   fix    rates    for    action 
official    574 

610.    Duty  of  municipality  to  prevent  excessive  rates 576 

511.  Rate  subject  to  change  by  state  if  made  without  authority. 576 

512.  Delegated  power  to  fix  rates  binding  until  revoked 578 

513.  Statutory  construction  of  power  to  regulate  and  fix  rates.. 579 

514.  Power  to  regulate  rates  not  surrendered  by  implication. .  .581 

515.  Rates  fixed  by  contracts  not  clearly  authorized  held  declar- 
atory   only    582 

516.  Strict  construction  saves  right  to  regulate  if  rate  not  ex- 
pressly   covered    583 

517.  Right   to   regulate   under   reserved   right   to   alter,   amend 

or   repeal    585 

518.  Regulation  continuing  and  akin  to  police  power 586 

519.  Liberal  construction  finds  contract  binding  on  rates 589 

520.  Delegated    power    to    fix    rates    by    contract    or    franchise 
limited    thereby    590 


XX  TABLE  OF  CONTENTS. 

SECTION.  PAGE. 

521.  Contract  giving  consent  and  fixing  rates  valid 591 

522.  Fixing  maximum  rates   permits   regulation   as  to   reason- 
ableness        592 

523.  Fixing  rates  not  favored — tends  to  create  monopoly 593 

CHAPTER  XXVI.— REASONABLE   REGULATIONS. 

524.  Municipal  control  and   rental   charges 594 

525.  Concentration  of  service  lines  and  poles 595 

526.  Police  regulations   for  underground   conduits 596 

527.  Regulation  and  installation  and  supply  of  equipment 596 

528.  Meter  and  equipment  provided  with  service 597 

529.  Expense  of  meter  and  connections  met  by  customer,  not 
by  municipality    597 

530.  Franchise  provisions  controlling  if  express  and  consistent. 598 

531.  Meter  as  a  measure  prevents  waste 600 

532.  Meter  rental  included  in  price  fixed  for  service 602 

533.  Customer  entitled  to  have  service  accurately  measured 603 

534.  Municipality  may  tax  meter  rental  to  customer 603 

535.  Customers  rather  than  taxpayers  pay  meter  rentals 604 

536.  Connections  with  premises  included  in  rate  charge 605 

537.  Service  connections  integral  part  of  equipment 605 

538.  Connections    at    expense    of    customer    under    municipal 
ownership    606 

539.  Liability  for  meter,  etc.,  determined  by  provisions  and  con- 
struction of  franchise   607 

540.  Special  assessment  of  abutting  property — Unearned  incre- 
ment        608 

541.  Municipality  obliged  to  preserve  streets  for  travel 609 

542.  Police  power  to  regulate  use  of  street 609 

543.  Party  line  telephones  may  be  prohibited 610 

544.  Unreasonable  to  require  service  for  all 610 

545.  Municipality  requiring  conduits   limited  to  reasonable  ne- 
cessity        611 

CHAPTER    XXVII.— REGULATIONS    FOR    RENDERING    TELE- 
PHONE SERVICE. 

546.  Facts  peculiar  to  telephone  service 613 

547.  Competition  extravagant  and  ineffective  regulation 614 

548.  Expense  of  duplication  carried  by  customer  and  indefens- 
ible        615 

549.  Competition  in  telephone  service  peculiarly  undesirable. .  .615 

550.  Eflacient  public  regulation  of  telephone  especially  necessary. 616 

551.  Reqirements  for  physical  connection  of  telephone  plants. 617 

552.  Contracts  restricting  service  in  restraint  of  trade 617 


TABLE  OF  CONTENTS.  XXI 

SECTION.  PAGE. 

553.  Contract  for  connected  or  through  service 618 

554.  Physical  connection  only  by  contract  or  state  requirement. 619 

555.  Cost  and  value  of  telephone  service  with  increase  of  sub- 
scribers      619 

556.  Classification  of  telephone  service 621 

557.  Physical  connection  by  constitutional  provision 622 

558.  Statutory  and  constitutional  requirements  upheld 624 

559.  Physical  connection  by  contract  available  to  all  alike 625 

560.  Through  telephone  service  peculiarly  necessary 626 

561.  Undertaking  to  furnish  connected  service  becomes  general. 627 

562.  Holding    out    consolidated    service    establishes    it    perma- 
nently        628 

563.  Exclusive  contract  for  through  service  upheld  from  neces- 
sity       629 

564.  Necessity  for  exclusive  service  question  of  fact 630 

565.  Common-law  and  statutory  regulations  distinguished 631 

566.  Public   and   private   business   distinguished 632 

567.  Necessity   for  state   regulation  to  insure  public  complete 
service    633 

568.  Service  of  common  carrier  and  telephone  distinguished 634 

569.  Doctrine  of  increasing  cost  of  service  peculiar  to  telephone. 636 

570.  Value  of  service  increases  with  its  amount 637 

571.  No  discrimination  in  rates  nor  limitation  of  service 637 

CHAPTER   XXVIII.— MUNICIPAL    OWNERSHIP. 

572.  Ownership    unless    regulation    adequate 640 

573.  Power  of  municipality  to  own  and  operate  municipal  pub- 
lic   utilities    641 

574.  Eminent  domain  always  available  to  municipality 641 

575.  Just  compensation  condition  not  limitation  on  its  exercise. 643 

576.  Motive  of  municipal  and  private  owners  compared 643 

577.  Failure    of   regulation    necessitates    ownership    by    munici- 
pality      644 

578.  Tendency  and  attitude  of  courts  toward  municipal  owner- 
ship       644 

579.  Municipal  ownership  and  interests  of  public 646 

580.  Policy    of    municipal    ownership    legislative    not    judicial 
question    647 

581.  Sale  to  municipality  without  statutory  authority 648 

582.  Extension    of    sphere    of   municipal   activity    necessary 649 

583.  Practical   necessity  long  recognized   as  basis  of  fiaunicipal 
ownership    650 

584.  Ownership  without  operation  permitted 651 

585.  Constitutionality   of   municipal    ownership   unquestioned. .  .652 


XXll  TABLE  OF  CONTENTS. 

CHAPTER    XXIX.— MUNICIPAL    BUREAUS    OR    COMMISSIONS. 

SECTION.  PAGE. 

586.  Strict    enforcement    of   franchise   and    contract    rights    es- 
sential     655 

587.  Means  of  enforcing  rights — Information  necessary 656 

588.  Enforcement  by  legal  proceedings  no  longer  adequate 656 

589.  Relief  by  legislative  enactment  aside  from  commissions.  .657 

590.  Popular  control  by  public  generally  impracticable 658 

591.  Public  utility  commissions  adequate  and  practically  neces- 
sary       659 

592.  Relief    summary,    adequate   and    inexpensive 660 

593.  Matter  of  business  administration  by  experts 660 

594.  Business    of    municipal    public    utilities    and    politics    dis- 
tinguished      661 

595.  Concentration   of  power  and  responsibility 662 

596.  Commission  constitutional  and  entirely  legal 662 

597.  Commission   a  practical   business  necessity 664 

598.  Relief  at  hands  of  courts  practically  impossible 665 

599.  Reasonable  rates  required  at  common  law  and  by  statute.. 666 

600.  Tendency  toward  "home  rule"  of  local  matter 666 

•601.    Municipal  franchise  bureau  or  commission  necessary 667 

CHAPTER  XXX.— STATE  PUBLIC  UTILITY  COMMISSIONS. 

602.  State  public  utility  commission  necessary 668 

603.  State  regulation   supplants  competition 669 

604.  Indeterminate  franchise  properly  regulated 669 

605.  State  control  of  capitalization  and  expenditures  essential .  670 

606.  Impartial  commission  of  experts  approved  by  courts 670 

607.  Commission  required  by  importance  and  complexity  of  duty. 671 

608.  Franchise    provisions    and   matters    of   administration    de- 
scribed        672 

609.  Monopoly  under  indeterminate  permit 674 

610.  State   commissions   first    established 675 

611.  Police  power  as  basis  for  regulation 676 

612.  Scope  of  activity  of  business  requires  state  commission. .  .677 

APPENDIX  A. 
Public  Service  Commissions  Law  of  New  York 681 

APPENDIX  B. 
Public   Utilities   Law    of   Wisconsin 796 

APPENDIX  C. 
Public    Utilities    Law     of     Indiana 848 


TABLE    OF    CA8ES. 


[Beferencea  are  to  Sections.] 


Adams  v.  Samuel  R.  Bul- 
lock &  Co.,  94  Miss.  595,      95 

Adams  Express  Co.  v.  Ohio, 
165   U.    S.   219,  585 

Admiral  Realty  Co.  v.  New 
York,  206  N.  Y.  110. 

11,  13,  19,  25,  42,  43,  584 

Agua  Pura  Co.  v.  Las 
Vegas,  10  N.  Mex.  6, 

422,    506,    509 

Aiken  v.  Columbus,  167  Ind. 
139,  265,    268 

Aldrich  v.  Tripp,  11  R.  I. 
141,  265 

Aldworth  v.  Lynn,  153 
Mass.   53,  265 

Allegheny  County  Light  Co. 
V.  Shadyside  Electric 
Light  Co.,  37  Pa.  Super 
Ct.  79,  213 

Allen  V.  Clausen,  114  Wis. 
244,  397,    399 

Allen  &  C.  Mfg.  Co.  v. 
Shreveport  Waterworks 
Co.,    113   La.    1091,  236 

Allison  V.  Chester,  69  W. 
Va.    533,  68,    84 

Alpena  City  Water  Co.  v. 
Alpena,   130   Mich.    518,         320 

Alter  V.  Cincinnati,  56  Ohio 
St.   47,  42 

Altgelt  V.  San  Antonio.  81 
Tex.   436,  320 


Alton     V.     Illinois     Transp. 

Co.,  12  111.  38,  402 

Aivord    V.   Syracuse,    163   N. 

Y.  158,  530 

American  Rapid  Tel.  Co.  v. 

Hess,   125   N.   Y.   641,  397 

American    Waterworks    Co. 

V.  State,  46  Nebr.  194,    197,  213 
Ancrum    v.    Camden    Water, 

L.  &  I.  Co.,  82  S.  Car.  284, 

236,  257 
Anderson     v.     Berwyn,     135 

111.    App.    8,  530 

Anderson   v.   Fuller,  51   Fla. 

380,  95,  397,  413 

Andreas    v.    Gas   &    Electric 

Co.  of  Bergen  Co.,  61  N.  J. 

Eq.   69,  287,   307 

Andrews   v.    National    Fdry. 

&    Pipe    Works,    61    Fed. 

782,  32,  38 

Anoka  Water  Works,  E.  L. 

&    P.    Co.    V.    Anoka,    109 

Fed.    580,  68,   83 

Arkadelphia    E.    L.    Co.    v. 

Arkadelphia,       99      Ark. 

178  463,  484 

Armour  Packing  Co.  v.  Edi- 
son  E.    Ilium.   Co.,   100  N. 

Y.   S.  605,  213 

Aschoff     V.     Evansville,     34 

Ind.   App.   25,  265 

Ashland  v.  Wheeler,  88  Wis. 

607.  95,  96 

Ashland    St.   R.   Co.   v.    Ash- 
land. 78  Wis.  271.  397 


TABLE    OF    CASES. 


[References  are  to  Sections.] 


Atchison,  &c.,  R.  R.  Co.  v. 
Denver,  &c.,  R.  R.  Co., 
110   U.   S.   667,  556,   565 

Atchison  St.  R.  Co.  v.  Nave, 
38  Kans.   744,         213,  372,   397 

Atlantic  City  Waterworks 
Co.  V.  Atlantic  City,  48 
N.  J.  L.  378,  11,  12 

Attorney  General  v.  Detroit, 
150  Mich.  310,  58,  60 

Attorney  General  v.  Wal- 
worth L.  &  P.  Co.,  157 
Mass.   86,  610 

Augusta  V.  Mackey,  113  Ga. 
64,  265 

Aurora  Water  Co.  v.  Auro- 
ra,  129   Mo.   540,  68 

Austin  v.  Bartholomew,  183 
U.  S.   698,  107  Fed.   349,       350 

Austin  V.  Coggeshall,  12  R. 
I.  329,  11,  14 

Austin  V.  Seattle,  2  Wash. 
667,  68 

Avery    v.    Job,    25    Ore.    512,     11 


B 


Bailey   v.   Fayette   Gas-Fuel 

Co.,  193  Pa.  175,  213,  229 

Bailey    v.    Philadelphia,    184 

Pa.  594,  350,  367 

Baker  v.  Grand  Rapids,  142 

Mich.    687,  58 

Baker  v.  Northeast,  151  Pa. 

234,  265 

Baldwin    v.    Smith,    82    111. 

162,  384 

Ball    V.     Texarkana     Water 

Corp.,     (Tex.     Civ.     App.) 

127    S.    W.    1068,  422 

Baltimore  v.  B.  Trust  &  G. 

Co.,  186  U.  S.  673,  108,  530 
Baltimore    v.    Gill,    31    Md. 

375,  71 

Barnes  v.  Hill,  23  Okla.  207,    42 


Barre  v.  Perry  &  Scribner, 
82   Vt.   301,  173 

Barsaloux  v.  Chicago,  245 
111.   598,  141 

Bartholomew  v.  Austin,  85 
Fed.    359,  323,    341 

Bartlesville  E.  L.  &  P.  Co. 
V.  Bartlesville  I.  R.  Co., 
26    Okla.    456,  136,    143 

Baumgartner  v.  Hasty,  100 
Ind.  575,  11 

Beck  v.  Kittanning  Water 
Co.,    8    Sadler     (Pa.)     237,  236 

Becker  v.  Keokuk  Water- 
works, 79  Iowa  419,  236 

Beekman  v.  Third  Ave.  R. 
Co.,  153  N.   Y.   144, 

105,  397,  400 

Belding  Improvement  Co.  v. 
Belding,  128  Mich.  79,     42,  47 

Bell  V.  Plattville,  71  Wis. 
139,  42 

Belleville  v.  Citizens'  Horse 
R.    Co.,   152    111.    171, 

114,    372,    384 

Bell,  Sheriff  v.  Louisville 
Water  Co.,  32  Ky.  Law 
Rep.  699  336 

Bennett  v.  Mt.  Vernon,  124 
Iowa  537,  265 

Bessemer  v.  Bessemer 
Waterworks,  152  Ala.   391, 

463,    506 

Bienville  Water  Supply  Co. 
V.  Mobile,  175  U.  S.  109,       149 

Billings  Mut.  Tel.  Co.  v. 
Rocky  Mountain  Bell  Tel. 
Co.,   155   Fed.   207,         556,   557 

Birmingham  v.  Birming- 
ham W.  Co.,  (Ala.)  42  So. 
10,  197,    213,    225 

Birmingham  &  Pratt  Mines 
St.  R.  Co.  V.  Birming- 
ham St.  R.  Co.,  79  Ala. 
465,  121,  128,  142,  397,  409 


TABLE    OF    CASES. 


[KefereTwea  are  to  Sections.] 


Biack  V.  Columbia,  19  S. 
Car.  412.  4 

Blair  v.  Chicago,  201  U.  S. 
400,      95,  173,  179,  397,  404,  422 

Blanchard  v.  Benton,  109 
111.  App.  569,  49,  52 

Blaschko  v.  Wurster,  156 
N.    Y.    437,  173,    187 

Blondell  v.  Consolidated 
Gas  Co.,  89  Md.  732,  530 

Blood  V.  Manchester  Elec- 
tric Light  Co.,  68  N.  H. 
340,  5 

Bluefield  Waterworks  &  L 
Co.  V.  Bluefield,  69  W.  Va. 
1,  95,  97 

Board  of  Rapid  Transit  R. 
Comrs.,  In  Re,  197  N.  Y. 
81,  7,    265,    276,    287,    304 

Board  of  Trade  Tel.  Co.  v. 
Barnett,    107    111.    507,  287 

Boerth  v.  Detroit  City  Gas 
Co.,  152  Mich.  654, 

213,    422,    428,    506,   521 

Boise  City  Artesian  Hot  & 
Cold  W.  Co.  V.  Boise  City, 
123   Fed.    232,         173,   175,   372 

Boise  City,  Idaho  v.  Boise 
Artesian  H.  &  C.  Water 
Co.,   186   Fed.   705,  95,    173 

Boise  City  Irrig.  &  Land 
Co.  V.  Clark,  131  Fed.  415, 

463,  484 

Boone  County  v.  Burling- 
ton &  M.  River  R.  Co., 
139  U.  S.  693,  174 

Bconton  v.  Boonton  Water 
Co.,  69  N.  J.  Eq.  23,      197,  201 

Eoothe  V.  Fulton,  85  Mo. 
App.  19,  265 

Boston  Electric  Light  Co. 
V.  Boston  Terminal  Co., 
184    Mass.    566.  173.    185 


Boston    Safe    Deposit    &    T. 

Co.    V.    Salem    Water    Co.. 

94   Fed.   238,  236 

Bothwell  V.  Consumers'  Co., 

13  Idaho  568,  444,  452,  530 
Bourke  v.  Olcott  Water  Co., 

84  Vt.  121,  197,  206 

Bradford    v.    Citizens'    Tel. 

Co.,  161  Mich.  385, 

213,  228,  556,  570 
Bragg    V.    Rutland,    70    Vt. 

606,  265 

Erenham  v.  Brenham  Water 

Co.,    67    Tex.    542,  156 

Brick    Presbyterian    Church 

V.  New  York,  5  Cow.  538,  4 
Bridgeport  v.  Housatonuc  R. 

Co.,  15  Conn.  475,  11 

Dridgeton    v.    Bridgeton    & 

M.   Traction  Co.,  62  N.  J. 

L.   592,  530 

Brink  v.  Grand  Rapids,  144 

Mich.    472,  265 

Brinkmeyer     v.     Evansville, 

29    Ind.    187,  4 

Bristol     V.     Bristol     &     W. 

Waterworks,  23  R.   I.  274, 

463,  472 
Britton   v.    Green   Bay,   &c., 

W.    W.    Co.,    81    Wis.    48, 

236,  251,  259 
Bronson  v.   Albion  Tel.  Co., 

67   Xebr.  Ill,  287 

Brooklyn,   In    Re,   143  N.   Y. 

596,  136.    149.    574 

Brooklyn   Union   Gas  Co.   v. 

New  York.   188  N.  Y.  334, 

444,  449 
Brooks     V.      Brookl>-n,     146 

Iowa  136,  58,     59 

Broome    v.    Telephone    Co., 

(N.  J.  Ch.)  7  Atl.  851,  287 
Brown  v.  Atlanta,  66  Ga.  71,  265 
Brown  v.  Radnor  Tp.   E.  L. 

Co.,  208   Pa.   453,  287 


TABLE   OF    CASES. 


[References  are  to  Sections.l 


Brown  v.  Salt  Lake  City,  3 

Utah   222,  265,    267 

Browne  v.  Boston,  179  Mass. 

321,  68,  71 

Brummitt   v.    Ogden   Water- 
works   Co.,    33    Utah    289, 

149,    152,    422 
Brunswick  &  T.  Water  Dist. 

V.    Maine    Water    Co.,    99 

Maine    371, 

444,    454,    463,    465,    473 
Brusso  V.   Buffalo,   90   N.   Y. 

679,  265 

Brymer     v.     Butler     Water 

Co.,  179  Pa.  231, 

444,    453,    463,    484,    494 
Buffalo  V.   Buffalo   Gas   Co., 

80  N.  Y.  S.  1093,  530,  531 

Bullmaster  v.  St.  Joseph,  70 

Mo.   App.  60,  265 

Burlington    v.    Central    Vt. 

R.,    82   Vt.    5,  19,    28 

Burlington     Water     Co.     v. 

Woodward,    49   Iowa   58,        68 
Burnes  v.  St.  Joseph,  91  Mo. 

App.    489,  265 

Burnham    v.    Milwaukee,    98 

Wis.    128,  68 

Burrall  v.  American  Tel.  & 

T.   Co.,  224  111.   266,       287,   300 
Burroughs   v.   Cherokee,   134 

Iowa  429,  95 

Bush    V.     Artesian    Hot    & 

Cold   Water   Co.,   4    Idaho 

618,  236 

Butler  V.   Bangor,  67  Maine 

385,  265 


Callen  v.  Columhus  Edison 
E.  L.  Co.,  66  Ohio  St.  166, 

287,   314 

Calumet  Service  Co.  v.  Chil- 
ton,   148    Wis.    334,  608 


Campbellsville   Tel.   v.   Leb- 
anon,   &c.,    Tel.    Co.,    118 

Ky.   277,  556,   558 

Canal    &    C.    St.    R.    Co.    v. 

Crescent    City    R.    Co.,    41 

La.   Ann.   561,  121 

C;pital  City  Gas  Co.  v.  Des 

Moines,   72  Fed.   818, 

444,  506,  oo>y 
Capital  City  Gaslight  Co.  v. 

Des    Moines,    72    Fed.    829,     95 
Capital  City  L.  &  F.  Co.  v. 

Tallahassee,    42    Fla.    462, 

186  U.   S.   401,         121,   136,   140 
Capital    City    Water    Co.    v. 

Montgomery,  92  Ala.  366,      68 
Capital  Gas  &  E.  L.  Co.  v. 

Gaines,    20  Ky.  Law    Rep. 

1464,  530 

Carey   v.    Kansas    City,    187 

Mo.  715,  265 

Carney  v.  Chillicothe  Water 

&  Light  Co.,  76  iviO.  App. 

532,  451 

Carpenter  v.  Capital  B.  Co., 

178   111.   29,  287,  300 

Carter    v.    Chicago,    57    111. 

285,  402 

Cartersville  Waterworks  Co. 

V.  Cartersville,  89  Ga.  689,  320 
Gary    v.    Blodgett,    10    Cal. 

App.    463,  38,   49,   54 

Cater   v.    Northwestern   Tel. 

Exch.    Co.,    60    Minn.    539, 

287,  310,  397 
Cedar    Rapids    Gaslight    Co. 

v.  Cedar  Rapids,  144  Iowa 

426,  223  U.  S.  655, 

463,  472,  484,  489 
Cedar  Rapids  Water  Co.  v. 

Cedar    Rapids,    118    Iowa 

234,  199  U.   S.   600, 

372,  386,  472,  484,  489 


TABLE  OF   CASES. 


xxvu 


[References  are  to  Sections.] 


Central  New  York  Tel.  &  T. 

Co.    V.    Averill,    199    N.    Y. 

128,  149,   161,   556,   571 

Central    Union    Tel.    Co.    v. 

Fehring,  146  Ind.  1S9,  213 

Central    Union    Tel.    Co.    v. 

State  ex  rel.,  118  Ind.  194, 

213,    214,    556 
Chadwick    v.    Maginnes,    94 

Pa.  St.  117,  323,  337 

Champer  v.  Greencastle,  138 

Ind.    339,  35 

Charles     River     Bridge     v. 

Warren     Bridge,     11     Pet. 

420,  129,  135 

Chas.    Simon's    Sons    Co.    v. 

Maryland    Tel.    &    T.    Co., 

99  Md.   141,  197,   201 

Charleston    L.    &    P.    Co.    v. 

Lloyd     Laundry     Co.,     81 

S.   Car.   475,  530 

Cheney  v.  Barker,  198  Mass. 

356,  287,  291 

Chesapeake    &    P.    Tel.    Co. 

V.    Mackenzie,    74   Md.    36,  287 
Chicago  V.  Chicago  &  O.  P. 

Elevated    R.    Co.,    250    111. 

486,  95,  114 

Chicago  V.  Gunning  System, 

214  111.  628,  114 

Chicago   V.    McGinn,    51    111. 

266,  402 

Chicago     V.     Rogers     Park 

Water  Co.,   214   111.   212,       463 
Chicago   V.    Rumsey,    87   111. 

355,  402 

Chicago    V.    Selz,    &c.,    Co., 

202    111.    545,  265 

Chicago     V.      Union      Bldg. 

Assn.,   102   111.   397,  402 

Chicago,     &c.,     R.     Co.     v. 

Wellman,    143    U.    S.    339, 

444.  447 


Chicago,  &c.,  R.  Co.  v. 
Whiting,  &c.,  R.  Co.,  139 
Ind.  297,  297 

Chicago  City  R.  Co.  v. 
People,   73    111.    541,  178 

Chicago  Gaslight  &  C.  Co. 
V.  People's  Gaslight  &  C. 
Co.,  121  111.  530,  149,  159 

Chicago  Municipal  Gaslight 
&  F.  Co.  V.  Lake,  130  111. 
42,  95,    114,    372,    376 

Chicago  Tel.  Co.  v.  North- 
western Tel.  Co.,  199  111. 
324,  121,    136,    142,    556 

Chicago  Union  Traction  Co. 
V.    Chicago,    199,    111.    484, 

416,   422,   484,   497,   506 

Childs  V.  Columbia,  87  S. 
Car.    566,  95,    100 

Chincleclamouche  Lumber  & 
Boom  Co.  V.  Common- 
wealth,  100   Pa.    St.   438,      140 

Christensen  v.  Fremont,  45 
Nebr.    160,  49,   50 

C.  H.  Venner  Co.  v.  Uroana 
Waterworks,  174  Fed.  348, 

463,   484 

Cincinnati  v.  Taft,  63  Ohio 
St.   141,  32.   34 

Cincinnati,  &c.,  R.  Co.  v. 
Clifford,   113   Ind.   460,  375 

Cincinnati  Gas  Light  & 
Coke  Co.  V.  Avondale,  43 
Ohio   St.    257,  173,    1S4 

Cincinnati,  H.  &  D.  R.  Co. 
V.  Bowling  Green,  57  Ohio 
St.    336,  213 

Cincinnati  Inclined  Plane 
R.  Co.  V.  Cincinnati,  52 
Ohio    St.    609,  372,    385 

Citizens'  Gas  &  Mining  Co. 
V.    Elwood,    114    Ind.    332, 

113,  121,  124,  431 


TABLE  OF  CASES. 


[References  are  to  Sections.} 


Citizens'     Gaslight     Co.     v. 

Wakefield,   161  Mass.   432, 

32,  49 
Citizens'  St.  R.  Co.  v.  Jones, 

34  Fed.  579,  145  U.  S.  633, 

136,   137 
City  R.   Co.  V.   Citizens'   St. 

R.   Co.,   166   U.    S.    557,         141 
Clapp    V.    Spokane,    53    Fed. 

515,  397 

Clark    V.    Los    Angeles,    160 

Cal.  30,  49,  54 

C^ark    V.    Louisville    Water 

Co.,  90  Ky.  515,  143  U.  S. 

1,  318,  321,  323,  335 

Clarksburg     Electric     Light 

Co.   V.    Clarksburg,   47   W. 

Va.  739,     97,  121,  122,  397,  409 
Cleveland  v.  Cleveland  City 

R.  Co.,  194  U.   S.   517, 

422,  423,  506,  519 
Cleveland  v.  Maiden  Water- 
works   Co.,    69    Wash.    541 

530,  538 
Cleveland  v.   R.   Co.,  201  U. 

S.  529,  97 

Cleveland    City    R.    Co.    v. 

Cleveland,     94     Fed.     385, 

422,  506 
Cleveland    Electric    R.    Co. 

V.    Cleveland,    204    U.    S. 

116,  372,    380,    381 

Cleveland   Gaslight   &   Coke 

Co.   V.   Cleveland,   71   Fed. 

610,  95 

Clinton-Dunn     Tel.     Co.     v. 

Carolina    Tel.    &    T.    Co., 

(N.  C.)  74  S.  E.  636, 

213,  556,  561 
Coburn  v.  New  Tel.  Co.,  156 

Ind.    90,  287,    295,    397 

Coffeyville  Min.    &   Gas   Co. 

V.    Citizens'    Nat.    Gas    & 

Minn.  Co.,  55  Kans.  173,      136 


Collensworth  v.  New  What- 
com,  16  Wash.   224,  265 

Colorado  Springs  v.  Colo- 
rado City,  42  Colo.  75,  15 

Colorado  Tel.  Co.  v.  Fields, 
15  N.  Mex.  431,  530,  537 

Columbia  Ave.  Sav.  Fund 
&c.,  Co.,  V.  Dawson,  130 
Fed.    152,  95 

Columbus  Gaslight  &  Coke 
Co.  V.  Columbus,  50  Ohio 
St.  65,  397,  410 

Columbus  St.  R.  &  Light 
Co.  V.  Columbus,  43  Ind. 
App.  265,  95 

Columbus  Water  Co.  v. 
Columbus,  48  Kans.  99,     11,  12 

Comrs.  V.  McMullen,  134  111. 
170,  402 

Commonwealth  v.  Coving- 
ton, 32  Ky.  Law  Rep.  837,  336 

Commonwealth  v.  Paducah, 
31  Ky.  L.  528,  323,  336 

Commonwealth  v.  Philadel- 
phia, 132  Pa.   St.  288,  5 

Comstock  V.  Syracuse,  5  N. 
Y.    S.    874,  19,   20 

Connolly  v.  Waltham,  156 
Mass.    368,  265 

Connor  v.  Marshfield,  128 
Wis.   280,  68,   81 

Conrey  v.  Waterworks  Co., 
41   La.   Ann.   910,  11,   13 

Consolidated  Electric  Light 
Co.  v.  People's  Electric 
Light  &  Gas  Co.,  94  Ala. 
372,  142 

Consolidated  Gas  Co.  v. 
Mayor,    146    Fed.    150,  612 

Consolidated  Gas  Co.  v. 
New    York,    157    Fed.    849, 

463,  484,  494 

Consumers'  Gas  Trust  Co. 
V.  Huntsinger,  12  Ind. 
App.  285,  296 


TABLE   OF    CASES. 


XXIX 


[References  are  to  Sections.] 


Contra   Costa   Water   Co.   v. 

Oakland,   159   Cal.   323, 

463,  484 
Contra   Costa   Water   Co.   v. 

Oakland,     165     Fed.     518, 

463,  466 
Cooper      V.      Goodland,      80 

Kans.   121,  530,  533 

Cosgriff  V.   Tri-State   Tel.  & 

T.    Co.,    15    N.    Dak.    210, 

287,    313 
County    of   Essex   v.   Salem, 

153   Mass.   141,  323,  326 

Ccverdale    v.    Edwards,    155 

Ind.    374,  372,    387 

Covington        V.        Common- 
wealth   of    Kentucky,    107 

Ky.    680,    173    U.    S.    231, 

323,   335,   336 
Covington     v.     District     of 

Highlands,    113    Ky.    612, 

323,    336 
Covington       &       Lexington 

Turnpike      Road     Co.      v. 

Sandford,    164    U.    S.    578 

444,   446,   453 
Covington    Gaslight    Co.    v. 

Covington,  22  Ky.   L.   796,     38 
Coy     V.     Indianapolis     Gas 

Co.,  146  Ind.  655, 

197,  207,  238,  265 
Craig   V.    Rochester   City    & 

B.   R.   Co.,  39  N.   Y.   404, 

303,  304 
Crawfordsville     v.     Braden, 

130  Ind.  149,       38,  39,  199,  432 
Creston    Waterworks   Co.   v. 

Creston,     101     Iowa     687,    68 
Crosby   v.    Montgomery,   108 

Ala.   498,  506 

Crouch     V.     McKinney,     47 

Tex.    Civ.    App.    54,  15 

Crowder     v.     Sullivan,     128 

Ind.    486.       4.   68,   85,   121,   136 


Culbertson     v.     Fulton,     127 

111.    30,  68 

Culver    V.    Streator,    34    111. 

App.  77,  107 

Cumberland  Gaslight  Co.   v. 

West   Virginia   &   M.    Gas 

Co.,    188    Fed.    585,  149 

Cumberland    Tel.    &    T.    Co. 

V.    Avritt,   120   Ky.    34, 

287,    309 
Cumberland    Tel.    &    T.    Co. 

V.    Cartwrlght    Creek    Tel. 

Co.,  32  Ky.  L.  1357,       197,  556 
Cumberland    Tel.    &    T.    Co. 

V.     Evansville,     127     Fed. 

187,   143    Fed.    238,         350,   354 
Cumberland    Tel.    &    T.    Co. 

V.   Hickman,   129   Ky.   220, 

197,   199 
Cumberland    Tel.    &    T.    Co. 

V.  Memphis,  183  Fed.  875,    484 
Cumberland    Tel.    &    T.    Co. 

V.    Mt.    Vernon,    176    Ind. 

177,  372,  375 

Cumberland    Tel.    &    T.    Co. 

V.     Louisville,     187     Fed. 

637,  484 

Cumberland    Tel.    &    T.    Co. 

V.    Railroad    Commission, 

156  Fed.   823,  463,  484 

Cumberland    Tel.    &    T.    Co. 

V.     State,    100    Miss.     102, 

556,  563 
Cunningham     v.     Cleveland, 

98   Fed.   657,  68,   149,   156 


Daily   v.   State,   51   Ohio   St. 

348,  287 

Daramann   v.  St.   Louis,   152 

Mo.    186,  265 

Danaher      v.  Southwestern 

Tel.    &    T.  Co..    94    Ark. 

533.  197.  213 


jcxx 


TABLE    OF    CASES. 


[References  are  to  Sections.l 


Janville  v.  Danville  Water 
Co.,  178  111.  299,  506,  517 

Danville  v.  Danville  Water 
Co.,  180  111.  235, 

68,   213,   422,    506 

Dartmouth  College  Case,  4 
Wheat.    518,  94,    133,    188 

Davenport  v.  Kleinschmidt, 
6   Mont.   502,  68 

Davis  V.  Clinton  Water- 
works  Co.,    54    Iowa   59,      236 

Davis  V.  Des  Moines,  71 
Iowa    500,  68 

Davis  V.  Mayor,  &c.,  14  N. 
Y.   506,  400 

Davoust  V.  Alameda,  149 
Cal.    69,  265,    268 

Dawson  v.  Dawson  Water- 
works   Co.,    106    Ga.    696, 

68,   86 

Dayton  v.  Bellevue  Water 
&  Fuel  Gaslight  Co.,  119 
Ky.   714,  323,   344 

Dean  v.  Walla  Walla,  48 
Wash.   75,  68 

Defiance  Water  Co.  v.  Defi- 
ance, 90  Fed.  753,  68,  149 

Deering,  In  Re,  93  N.  Y. 
361,  397 

Denver  v.  Davis,  37  Colo. 
370,  5,  9 

Denver  v.  Hallett,  34  Colo. 
393,  42,  58,  64 

Denver  v.  New  York  Trust 
Co.,   187  Fed.    890,         372,   382 

Des  Moines  v.  Des  Moines 
Waterworks  Co.,  95  Iowa 
348,  444,  463 

Des  Moines  City  R.  Co.  v. 
Des  Moines,  151  Fed.  854,  173 

Des  Moines  City  R.  Co.  v. 
Des  Moines,   90   Iowa  770, 

397,  412 


Des  Moines  Gas  Co.   v.  Des 

Moines,   199   Fed.   204, 

484,    488,    597 
Des  Moines  Gas  Co,  v.  Des 

Moines,    44    Iowa    505,  11 

Des    Moines    St.    R.    Co.    v. 

Des    Moines    Broad-Gauge 

St.    R.    Co.,    73    Iowa    513,  530 
Des    Moines    Water    Co.    v. 

Des  Moines,   192  Fed.  193, 

484,    489,    606 
Detroit   v.    Board   of   Water 

Comrs.,  108  Mich.  494,  223 

Detroit   v.    Detroit   Citizens' 

St.  R.  Co.,  184  U.  S.  368, 

97,  397,  422,  424 
Detroit    v.    Detroit    City    R. 

Co.,    56    Fed.    867,         173,    181 
Detroit  v.   Ft.   Wayne  &  B. 

I.  R.  Co.,  95  Mich.  456,        530 
Detroit  v.  Detroit  United  R. 

(Mich.)    137   N.    W.   645, 

95,  372,  381 
Detroit  Citizens'   St.   R.   Co. 

V.    Detroit    R.,    110    Mich. 

384,  171  U.  S.  48, 

121,  136,  397,  405 
Detroit  Gas   Co.   v.  Moreton 

Truck  &  Storage  Co.,   Ill 

Mich.  401,  530 

Dickinson     v.     Boston,     188 

Mass.    595,  265 

Donahue      v.      Morgan,      24 

Colo.  389,  68 

Donovan    v.    Allert,    11    N. 

Dak.    289,  287,    312 

Doughten  v.  Camden,  72  N. 

J.  L.  451,  530 

Dunbar     v.     American     Tel. 

Co.,  224  111.   9,  365 

Dunstan  v.  New  York,  86  N. 

Y.    S.    562,  265 

Dutton    V.    Aurora,    114    111. 

138.  68 


il. 


TABLE    OF    CASES. 


[References  are  to  Sections.] 


Button    V.    Poole,    1    Ventris 
318,  232 

Dyer    v.    Newport,    123    Ky. 
203,  42 

E 

Earles    v.     Wells,    94    Wis. 

285,  68,  71 

East  Moline  v.  Pope,  224  111. 

386,  68,     75 

East  Ohio  Gas  Co.  v.  Akron, 

81  Ohio  33,  173,  182 

East   Tennessee   Tel.   Co.   v. 

Russellville,    106   Ky.    667, 

372,  374,  397 
Eaton    V.    Fairbury    Water- 
works   Co.,    37    Nebr.    546,  236 
Eaton    V.     Weiser,    12     Idaho 

544,  265,   269 

Eau    Claire    Water    Co.    v. 

Eau   Claire,   127   Wis.   154,    38 
Edgerly    v.    Concord,    62    N. 

H.    8,  265 

Edson    V.    Olathe,    81    Kans. 

328,  95,    110 

Edwards        v.         Cheyenne, 

19  Wyo.  110,  114  Pac.  677, 

11,  13 
Eels  V.  American  Tel.  &  T. 

Co.,   143   N.   Y.    133, 

287,  302,  313 
Elchels  V.  Evansvllle  St.  R. 

Co.,  78  Ind.  261, 

287,  297,  397,  400,  401 
Elsenmenger     v.     St.     Paul 

Water    Comrs.     44    Minn. 

457,  265 

Elizabeth     City     v.     Banks, 

150  N.  Car.   407,  397.  409 

Ellinwood  v.   Reedsburg,  91 

Wis.   131,  38,  41 

Ennis    Waterworks    v.    En- 

nis,   (Tex.)   144  S.   W.   930  149 
Esberg   Cigar   Co.    v.    Port- 
land,  34   Ore.   282,  265 


Ettlinger  v.  New  York,  109 
N.   Y.   S.   44,  265 

Evans  v.  Holman,  244  111. 
596,  68,   73 

Exchange  &  Bldg.  Co.  v. 
Roanoke  Gas  &  Water 
Co.,  90  Va.  83,  213,  530 


Falmouth        v.        Falmouth 

Water  Co.,  180  Mass.  325,  484 
Fanning  v.  Osborne,  102  N. 

Y.    441,  105,    400 

Farmer  &  Getz  v.  Colum- 
biana County  Tel.  Co.,  72 

Ohio   St.    526,  506 

Farmers'  Tel.  Co.  v.  Wash- 

ta,  (Iowa)  133  N.  W.  361,  530 
Farwell  v.  Seattle,  43  Wash. 

141,  15 

Faulkner      v.      Seattle,      19 

Wash.    320,  68 

Fawcett  v.  Mt.  Airy,  134  N. 

Car.  125,  42,  44,  578 

Fellows  V.  Walker,  39   Fed. 

651,  32 

Ferris  v.  Carson  Water  Co., 

16  Nev.  44,  236 

Fidelity  &  C.  Co.  v.  Seattle, 

16  Wash.   445,  265 

Fidelity   Trust  &   G.   Co.   v. 

Fowler     Water     Co.,     113 

Fed.   560,  68 

First      National      Bank      v. 

Sarlls,  129  Ind.  201,  11,  14 

Fisher  v.  Greensboro  Water- 

Supply    Co.,    128    N.    Car. 

375,  236,  239 

Fisher  v.  New  Bern,  140  N. 

Car.   506,  265 

Fisher  v.  St.  Joseph  Water 

Co.,    151    Mo.    530,  530 


TABLE  OF  CASES. 


[References  are  to  Sections.] 


Heilbron  v.  Cuthbert,  96  Ga. 

312,  42,  43 

Heland    v.    Lowell,    (Mass.) 

3  Allen  408,  11 

Helena    Waterworks    Co.    v. 

Helena,    195    U.    S.    383,       164 
Henderson   v.    Kansas   City, 

177   Mo.   477,  265 

Henderson  v.  Ogden  City  R. 

Co.,   7   Utah   199,  397 

Henderson     v.     Young,     119 

Ky.  224,  5,  11,  13,  265 

Henderson     Water     Co.     v. 

Henderson  G.  Schools,  151 

N.  Car.  171,  42 

Kequembourg     v.     Dunkirk, 

18  N.  Y.  St.  570,  19,  21 

Hershfield   v.   Rocky   Moun- 
tain    Bell     Tel.     Co.,     12 

Mont.  102,  287,  310,  397 

Hester    v.    Greenwood,    172 

Ind.   279,  173 

Higgins    V.    San   Diego,    118 

Cal.  524,  68 

Hill    V.    Boston,    122    Mass. 

344,  265 

Hine      v.      Wadlington,      33 

Okla.   173,  213,  463 

Hobbs  V.  Long  Distance  Tel. 

&  T.   Co.,  147   Ala.    393, 

287,  308 
Hockett    V.    State,    105    Ind. 

250,  416 

Hodges    V.    R.    Co.,    58    Md. 

603,  401 

Holton   V.   Camilla,   134   Ga. 

560,  13,    38,    42,    48 

Home  Tel.  Co.  v.  Carthage, 

235  Mo.  644,  444,  454,  463,  484 
Home     Tel.     Co.     v.     North 

Manchester    Tel.    Co.,    47 

Ind.  App.  411,  556,  564 

Home    Tel.    Co.    v.    Peoples' 

Tel.    &  T.    Co.,   125    Tenn. 

270,  556,  565 


Home   Tel.    Co.   v,    Sarcoxie 

Light  &  Tel.  Co.,  236  Mo. 

114,  556,  567,  568 

Home  Tel.  &  T.  Co.  v.  Los 

Angeles,  155  Fed.  554,  506,  514 
Home  Tel.  &  T.  Co.  v.  Los 

Angeles,   211   U.    S.    265, 

506,  513 
Hone  V.  Presque  Isle  Water 

Co.,  104  Maine  217,       236,  258 
Hoover    v.    Deffenbaugh,    83 

Nebr.  476,  530 

Horkan     v.     Moultrie,     136 

Ga.    561,  3 

Horner  v.   Oxford   Water  & 

Electric   Co.,    153   N.    Car. 

535,  444,  463,  506 

Kourigan     v.     Norwich,     77 

Conn.  358,  265 

Hourna    Lighting,    &c.,    Co. 

V.   Hourna,  127  La.  726,       136 
House    V.    Houston    Water- 
works Co.,   88  Tex.   233,       236 
Houston  V.  Houston  City  St. 

R.   Co.,  83  Tex.   548,     173,  182 
Howell  V.  Millville,  60  N.  J. 

L.    95,  49,    53 

Howsmon  v.  Trenton  Water 

Co.,   119   Mo.   304,  236 

Huffman  v.  Marcy  Mut.  Tel. 

Co.,    143    Iowa   590,  213 

Huron    Waterworks   v.    Hu- 
ron, 7  S.  Dak.  9,  350,  351 
Hyatt  V.  Williams,  148  Cal. 

585,  49,  54 


Illinois    Central    R.    Co.    v. 

Chicago,  176  U.  S.  646, 

103,   177 
Illinois  Trust  &  Sav.   Bank 

V.   Arkansas  City,  76  Fed. 

271,  5,  6 


TABLE  OF   CASES. 


[References  are  to  Sections.] 


Illinois  Trust  &  Sav.  Bank 
V,  Arkansas  City  Water 
Co.,   67   Fed.   196,  506,   523 

Indiana  Natural  &  Illumi- 
nating Gas  Co.  V.  An- 
thony,   26    Ind.    App.    307,  213 

Indiana  Natural  &  Illumi- 
nating Gas  Co.  V.  State  ex 
rel.   Ball,  158  Ind.   516, 

197,  213,  530 

Indiana  R.  Co.  v.  Hoffman, 
161   Ind.   593,  95 

Indianapolis  v.  Consumers' 
Gas  Trust  Co.,  144  Fed. 
640,  350,  358,  580 

Indianapolis  v.  Consumers' 
Gas  Trust  Co.,  140  Ind. 
107,      95,  113,  199,  422,  431,  432 

Indianapolis  v.  Indianapo- 
lis Gaslight  &  Coke  Co., 
66  Ind.  396,  5,  11,  95,  112 

Indianapolis  v.  Navin,  151 
Ind.   139,  422 

Indianapolis  St.  R.  Co.  v. 
Citizens'  St.  R.  Co.,  127 
Ind.   368,  95 

Ingersoll  v.  Nassau  Electric 
R.  R.   Co.,   157   N.   Y.   453,  388 

International  Lumber  Co.  v. 
American  Suburbs  Co., 
119  Minn.  77,  372 

International  Water  Co.  v. 
El  Paso,  51  Tex.  Civ.  App. 
321,  530,  536 

Interstate  Consol.  St.  R.  Co. 
V.  Massachusetts,  207  U. 
S.  79,  95,  506 

Ironton  v.  Kelley,  38  Ohio 
St.  50,  265 

Ironwood  Waterworks  Co. 
V.  Ironwood,  99  Mich.  454,    71 

Irvin  V.  Rushville  Co-Opera- 
tive  Tel.  Co.,  161  Ind.  524, 

213.  219 


Irvine   v.   Greenwood,   89   S. 

Car.    511,  265,    273 

Irwin     V.     Great     Southern 

Tel.   Co.,   37   La.   Ann.   63,  287 


Jack  V.  Grangeville,  9  Idaho 

291,  149 

Jackson  v.  Anderson,  97 
Miss.  1,  265 

Jackson  v.  EUendale,  4  N. 
Dak.   478,  530 

Jackson  County  Horse  R. 
Co.  V.  Interstate  Rapid 
Transit  R.  Co.,  24  Fed. 
306,  121 

Jacksonville  v.  Jacksonville 
R.   Co.,  67   111.  540,  402 

Jacksonville  v.  Southern 
Bell  Tel.  &  T.  Co.,  57  Fla. 
374,  506 

Jacksonville  Electric  Light 
Co.  V.  Jacksonville,  36 
Fla.  229,  19,    28 

Jamaica  Pond  Aqueduct  Co. 
V.  Brookline,  121  Mass.  5,  397 

Janeway  v.  Duluth,  65 
Minn.  292,  11,  13 

Jaynes  v.  Omaha  St.  R.  Co., 
53    Nebr.    631,  204,   287 

Jennings  v.  Dark,  175  Ind. 
332,  375 

Johnson  v.  State,  113  Ind. 
143,  530,  537 

Johnson  v.  Thomson-Hous- 
ton Electric  Co.,  7  N.  Y. 
S.   716,  287 

Joilet  V.  Alexander,  194  111. 
457,  68,  74 

Joplin  v.  Southwest  Miss- 
ouri Light  Co.,  191  U.  S. 
150,  121,  149 

Joseph  V.  Joseph  Water- 
works Co.,   57   Ore.   586,       173 


TABLE  OF  CASES. 


[References  are  to  Sections.] 


Jiidson  V.  Winsted,  SO  Coun. 

384,  265 

Julia    Bldg.    Assn.    v.    Bell 

Tel.   Co.,   88   Mo.   258, 

287,  292,  305 


K 


Kankakee  v.  American  Water 

Supply   Co.,    199   Fed.   757,  444 
Keefe    v.    People,    37    Colo. 

317,  5 

Keen   v.   Waycross,   101   Ga. 

588,  58,  63 

Keene  Syndicate  v.  Wichita 

Gas,  Electric  L.  &  P.  Co., 

69    Kans.    284,  350,    372 

Kelley     v.     Milwaukee,     18 

Wis.  85,  11 

Kelly     V.     Minneapolis,     63 

Minn.    125,  68,    79 

Kelsey  v.   Board   of  Fire   & 

Water    Comrs.,    113    Mich. 

215,  530 

Kelsey    v.    New    York,    107 

N.   Y.   S.   1089,  265 

Kennebec      Water      Dist.  v. 

Waterville,   96   Maine  234,     68 
Kennebec     Water     Dist.     v. 

Waterville,    97   Maine   185, 

444,  463,  471 
Kester     v.     Western     Union 

Tel.    Co.,    108    Fed.    926,       2S7 
Klehl     V.     South     Bend,     76 

Fed.  921,  68 

Kimball   v.    Northeast   Har- 
bor Water  Co.,  107  Maine 

467,  197,    200 

Kincaid       v.       Indianapolis 

Natural  Gas  Co.,  124  Ind. 

577,  287,  296 

Kings    County    Elevated   R. 

Co.,  In  Re,  105  N.  Y.  97, 

95,  102 


Kinsey  v.  Union  Traction 
Co.,    169    Ind.    563, 

287,  298,  299 

Kinsman  St.  R.  Co.  v. 
Broadway  &  U.  St.  R.  Co., 
36    Ohio    St.    239,  372 

Kirby  v.  Citizens'  R.  Co.,  48 
Md.    168,  397 

Kirby  v.  Citizens'  Tel.  Co., 
17  S.  Dak.  362,  287,  311 

Kirkwood  v.  Meramec  High- 
lands Co.,  94  Mo.  App. 
637,  121 

Knappman  Whiting  Co.  v. 
Middlesex  Water  Co.,  64 
N.   J.  L.  240,  236,  248,  260 

Knoxville  v.  Knoxville  Water 
Co.,  212  U.  S.   1, 

164,  463,  468,  469,  484,  485 

Knoxville  v.  Knoxville  Wa- 
ter  Co.,    107    Tenn.    647, 

422,   506,   518 

Knoxville  Water  Co.  v. 
Knoxville,    189    U.    S.    434, 

97,   422,  506,  518 

Knoxville  Water  Co.  v. 
Knoxville,   200   U.    S.   22, 

149,  164,  166 

Kreigh  v.  Chicago,  86  111. 
410,  402 

Kiueger  v.  Wisconsin  Tel. 
Co.,   106   Wis.   96,  287 

Kuehn  v.  Milwaukee,  92 
Wis.  263,  265 

Kyle  V.  Malin,  8  Ind.  34,         10 


Lackey    v.    Fayetteville 

Water  Co.,  80  Ark.  108,  11 
Laclede  Gaslight  Co.  v.  Gas 

Consumers'  Assn.,  127  Mo. 

App.   442,  530 

I-a  Crosse  v.  La  Crosse  Gas 

&  E.   Co.,  145  Wis.  408,       607 


TABLE  OF  CASES. 


[Hefercnces  are  to  Hcctiotis.] 


Ladd    V.    Boston,    170 

322,  530 

Ladd   V.   Jones,   61   111.   App. 

584,  49,    52 

Laighton    v.    Carthage,    Mo., 

175    Fed.    145,  372,   3S1 

Lake  County  Water  &  Light 

Co.  V.  Walsh,  160  Ind.  32, 

350,  352 
Lake  Roland  Electric  R.  Co. 

V.    Baltimore,   77   Md.   352, 

95,  108 
i..iike     View     v.     Rose     Hill 

Cemetery   Co.,   70   111.   191,  114 
I^amar     Water     &     Electric 

Light    Co.    V.    Lamar,    128 

Mo.    188,    140    Mo.    145,  68 

Lawrence   v.   Fox,  20   N.   Y. 

268,  231 

Lawrence    v.    Methuen,    166 

Mass.  206,  42 

Lee   V.    Mound    Station,    118 

111.   312,  402 

Lehigh     Water     Company's 

Appeal,    102    Pa.    515,    121 

U.   S.   388,  32 

Lenzen    v.    New     Braunfels, 

13  Tex.  Civ.  App.  335, 

265,  272 
Levis    V.    Newton,    75    Fed. 

884,  95,  173,  184,  397 

Levy  V.  McClellan,  196  N.  Y. 

178,  68,  72 

Levy   V.    Salt   Lake   City,    3 

Utah  63,  265 

LewisviUe   Natural    Gas   Co. 

V.    State   ex   rel.,   135   Ind. 

49,  422,  436 

Light,  Heat  &  Water  Co.  v. 

Jackson,   73    Miss.    598,         149 
Lincoln  Gas  &  E.  L.  Co.  v. 

Lincoln,  223  U.   S.   349, 

463,  484.  492 
Linn    V.    Chambersburg,   160 

Pa.  511,  32.  33 


Little    Falls     Electric,     &c., 

Co.    V.    Little    Falls,    102 

Fed.    663,  149,    153 

Little   Rock   V.   Citizens'   St. 

R.    Co.,   56   Ark.    28,  397 

Loan    Assn.    v.    Topeka,    20 

Wall.    655.  62 

Lobdel    V.    Chicago,    227    111. 

218,  68,  76 

Lockhart    v.    Craig    St.     R. 

Co.,    139    Pa.    419,  287 

Lockwood    V.    Dover,    73    X. 

H.   209,  265 

Loeber     v.     Butte     General 

Electric    Co.,    16   Mont.    1,  287 
Logan  V.  Pyne,  43  Iowa  524, 

121,   129 
Logan   Natural   Gas  &   Fuel 

Co.  V.  Chillicothe,  65  Ohio 

St.    186,  95 

Logansport  v.  Dick,  70   Ind. 

65,  265 

Logansport    &    W.    V.    Gas 

Co.  V.  Ott,  30  Ind.  App.  93, 

213,  227 
Logansport    R.    Co.    v.    Lo- 
gansport,    114     Fed.     688, 

192  U.  S.  604, 

121,    173,    181,    397 
London  Mills  v.  White,  20S 

111.  289,  95 

Long    v.    Duluth,    49    Minn. 

280,  121 

Long     Branch     Commission 

V.    Tintern    Manor    Water 

Co.,  70  N.  J.   Eq.   71, 

422,  430,  484,  506,  510 
Long    Island    Water   Supply 

Co.  V.  Brooklyn,  166  U.  S. 

685,  575 

Lord      V.      Ekiultable      Life 

Assur.    Society.   194   N.   Y. 

212,  95 


XXXVIU 


TABLE  OF  CASES. 


{References  are  to  Sections.] 


Los  Angeles  v.  Los  Angeles 

City  Water  Co.,  177  U.  S. 

558,  422,  424,   506,  514 

Los     Angeles     City     Water 

Co.  V.  Los  Angeles,  88  Fed. 

720,  424,  427,   506,  512 

Los  Angeles  City  Water  Co. 

V.   Los  Angeles,   103   Fed. 

711,  506 

Los    Angeles    Pac.    Co.    v. 

Hubbard,  17  Cal.  App.  646,    95 
Los  Angeles  R.   Co.   v.  Los 

Angeles,  152  Cal.  242, 

372,  377 
Louisville  V.  Commonwealth, 

62   Ky.    295,  323,  333,  335 

Louisville     v.     Cumberland 

Tel.   &   T.   Co.,  224   U.   S. 

649,  173,   174 

Louisville     v.      Cumberland 

Tel.    &   T.    Co.,   225   U.    S. 

430,  444,   447,   484 

Louisville       v.       Louisville 

Home    Tel.    Co.,    149    Ky. 

234,  530,  543 

Louisville    v.     McAteer,     26 

Ky.  L.  425,  323,  335 

Louisville    &    N,    R.    Co.    v. 

Kentucky,    161   U.    S.    677,  140 
Louisville    City    R.    Co.    v. 

Louisville,   8   Bush   415,       397 
Louisville    Gas    Co.    v.    Dul- 

aney,  100  Ky.  405, 

451,  532,  530 
Louisville  Home  Tel.  Co.  v. 

Louisville,   130  Ky.   611, 

95,   109,   576 
Louisville  Trust  Co.  v.  Cin- 
cinnati, 76  Fed.  296,      173,  181 
Love  V.  Atlanta,  95  Ga.  129,  265 
Love    V.    Holmes,    91    Miss. 

535,  32 


Lcvejoy  v.  Bessemer  Water- 
works Co.,   146  Ala.   374, 

236,  251 

Lowther  v.  Bridgeman,  57 
W.   Va.   306,  287,  309 

Ludington  Water-Supply  Co. 
V.  Ludington,  IW  Mich. 
480,  68,  323,  343 

Luther  v.  Wheeler,  73  S. 
Car.   83,  68 

Lutz  V.  Tahlequah  Water 
Co.,   29    Okla.    171,       236,   256 

Lynch  v,  Springfield,  174 
Mass.   430,  265,   275,   276 


M 


Macon  Consol.  St.  R.  Co.  v. 

Macon,  112  Ga.  782,  397,  413 
Madera  Waterworks  v.  Ma- 
dera, 185  Fed.  281,  136 
Madison   v.   Alton,    &c.,   235 

111.   346,  95 

Madison  v.  Madison  G.  &  E. 

Co.,  129  Wis.  249,  444,  452 
Magee     v.     Overshiner,     150 

Ind.   127,  287,  294 

Maham     v.     Michigan     Tel. 

Co.,  132  Mich.  242,  556,  562 
Maine  Water  Co.  v.  Water- 

ville,  93  Maine  586,  323,  342 
Manhattan     Trust     Co.     v. 

Dayton,  59  Fed.  327,  154 

Manitowoc  v.   Manitowoc  & 

North.  Trac.  Co.,  145  Wis. 

13,  506,  511 

Mansfield      v.      Humphreys 

Mfg.  Co.,  82  Ohio  St.  216,  213 
Marion   Electric   Light,   &c., 

Co.,  V.  Rochester,  149  Ky. 

810,  95,  197 

Marshfield  v.  Wisconsin  Tel. 

Co.,  102  Wis.  604,  399 

Mauldin    v.     Greenville,     33 

S.  Car.  1,  49,  50 


TABLE  OF  CASES. 


[References  are  to  Sections.] 


Maximilian  v.  New  York,  62 

N.    Y.    160,  265,   276 

Maxwell    v.    Telegraph    Co., 

51  W.  Va.  121,  309 

May      V,      Gothenburg,      88 

Nebr.  772,  121 

Mayo  V.  Washington,  122  N. 

Car.   5,  578 

McAvoy    V.    New    York,    54 

How.   Pr.   245,  265 

McBean  v.  Fresno,  112  Cal. 

159,  38,  40,  68 

McCann  v.  Johnson  County 

Tel.   Co.,   69   Kans.   212, 

287,  310 
McCarter,     Atty.     Gen.     v. 

Vineland    Light   &    Power 

Co.,  72  N.  J.  Eq.  767,    350,  362 
McIUhinney  v.  Trenton,  148 

Mich.    380,     397,   406,    530,   541 
McWethy    v.    Aurora    Elec- 
tric   Light    &    Power    Co., 

202  111.  218,  287,  300,  397 

Mealey    v.    Hagerstown,    92 

Md.  741,  19,  25 

Megins  v.  Duluth,  97  Minn. 

23,  265 

Memphis    v.    Postal    Tel.    & 

Cable    Co.,    164    Fed.    600,  530 
Memphis    City     R.     Co.     v. 

Mayor,    &c.,    4    Cold.    406,     99 
Memphis     Gaslight     Co.     v. 

Memphis,  93  Tenn.   612,       149 
Mercantile      Trust      Co.      v. 

Denver,    161    Fed.    769, 

173,   181 
Mercantile  Trust  &  Deposit 

Co.  V.  Columbus,  161  Fed. 

135,  149,  150 

Meridian   v.    Farmers'   Loan 

&   T.    Co.,    143   Fed.    67, 

149.  164 
Merrimack  River  Sav.  Bank 

V.   Lowell,   152  Mass.    556,    49 


Messersmith   v.   Buffalo,    122 

N.  Y.  S.  918,  265,  276 

Metcalf  V.  Seattle,  1  Wash. 

297,  68 

Metropolitan   Tel.   &   T.   Co. 

V.    Col  well    Lead    Co.,    67 

How.    Pr.    365,  287 

Metropolitan    Trust    Co.    v. 

Topeka    Water     Co.,     132 

Fed.  702,  236 

Middleton  v.  St.  Augustine, 

42  Fla.  287,  19,  25 

Milford     V.     Bangor     R.     & 

Electric     Co.,     104     Maine 

233,  236,  261 

Milford  V.  Bangor  R.  &  Elec. 

trie    Co.,    106    Maine    316, 

236,  261 
MUhau   V.    Sharp,   27   N.   Y. 

611,  397,  400,  409 

Miller      V.      Fitchburg,      180 

Mass.  32,  323,  329 

Miller     v.     Kalamazoo,     140 

Mich.   494,  265 

Mills    V.    Chicago,    127    Fed. 

731,  422,   437 

Millville     Gaslight     Co.     v. 

Vineland   Light    &    Power 

Co.,   72   N.   J.   Eq.   305,  136 

Milwaukee     v.     Milwaukee 

County,   95   Wis.    424,  68 

Milwaukee     Electric     R.     & 

Light    Co.    V.    Milwaukee, 

87  Fed.  577,  484 

Minneapolis    v.    Janney,    S6 

IMinn.    Ill,  19 

Minneapolis    v.    Minneapolis 

St.  R.,  215  U.  S.  417,       95,  422 
Minneapolis   General  E.   Co. 

V.    Minneapolis,    194    Fed. 

215,  530,  544 

Minneapolis    St.    R.    Co.    v. 

Minneapolis,  1S9  Fed.  445,  530 
Minturn   v.   Larue.   23    How. 

435,  129 


xl 


TABLE    OF    CASES. 


[References  are  to  Sections.} 


Missano   v.    New    York,    160 

N.   Y.    123,  265 

Missouri    v.    Bell    Tel.    Co., 

23  Fed.  539,  127  U.  S.  780, 

213,  216 
Mitchell    V.    Negaunee,     113 

Mich.   359,  32 

Mitchell  V.  Raleigh  Electric 

Co.,  129  N.  Car.  166,  265 

Mitchell  V.  Tulsa  Water,  &c., 

Co.,  21  Okla.  243,  149 

Moberly    v.    Richmond    Tel. 

Co.,  31  Ky.  L.  783,        506,  522 
Mobile    V.    Bienville    Water 

Supply    Co.,    130   Ala.    379,  213 
Mobile  V.  Stein,  54  Ala.  23, 

372,   388 
Monongahela   City    v.    Mon- 

ongahela     Electric     Light 

Co.,   3    Pa.   Dist.    R.    63,       397 
Monongahela  Water  Co.,  In 

Re,   223    Pa.    323,  484 

Monroe  v.  Detroit,  M.  &  T. 

Short    Line    R.    Co.,    143 

Mich.  315,  397,  530 

Monroe   Waterworks   Co.   v. 

Monroe,  110  Wis.  11, 

323,  345 
Montezuma  County  v.  Mon- 
tezuma    Water     &     Land 

Co.,    39    Colo.    166,  463 

Montgomery  v.  Capital  City 

Water  Co.,  92  Ala.  361,       397 
Montgomery  Gaslight  Co.  v. 

Montgomery,   87   Ala.   245,    11 
Montgomery  Light  &  P.  Co. 

V.  Watts,  165  Ala.  370, 

213,  444,  452 
Montgomery  Light  &  W.  P. 

Co.   V.   Citizens'  Light,   H. 

&  P.  Co.,  142  Ala.  462, 

121,  136,  142 
Mooreland  Rural  Tel.  Co.  v. 

Mouch,   48    Ind.    App.    521,  213 


Mordhurst  v.  Ft.  Wayne  & 
S.  W.  Traction  Co.,  163 
Ind.  268,  287,  297,  299 

Morristown  v.  East  Ten- 
nessee Tel.  Co.,  115  Fed. 
304,  95,  397 

Morton  v.  New  York,  140  N. 
Y.    207,  265 

Mott  V.  Cherryvale  Water 
&  Mfg.  Co.,  48  Kans.  12, 

236,   255 

Mugge  V. 'Tampa  Waterworks 
Co.,   52   Fla.   371, 

236,    243,    262 

Muncie  Natural  Gas  Co.  v. 
Muncie,  160  Ind.  97, 

422,  437 

Municipal  Fuel  Plants,  In 
Re,  182  Mass.  605,  58,    61 

Munn  V.  Illinois,  94  U.  S. 
113,  94,  191,  231,  414 

Murphy  v.  Worcester  Con- 
sol.  St.  R.  Co.,  199  Mass. 
279,  95,    506 

Murray  v.  Pocatello,  226  U. 
S.  318,  422,  506 


N 


Nalle  V.  Austin,  85  Tex.  520, 

15,   58,    62,    68 
Natick  Gaslight  Co.  v.  Nat- 

ick,    175    Mass.    246,  173 

National    Foundry    &    Pipe 

Works    V.    Oconto    Water 

Co.,  52  Fed.  29,  121 

National     Tube     Works     v. 

Chamberlain,    5    Dak.    54,    42 
National  Waterworks  Co.  v. 

Kansas,  28  Fed.  921, 

397,  411 

National  Waterworks  Co.  v. 
Kansas  City,  62  Fed.  853, 

372,  383,  463,  474,  484,  487 


TABLE    OF    CASES. 


xli 


[Hefertnces  are  to  Hectioms.] 


National  Waterworks  Co.  v. 

Kansas  City,  20  Mo.  App. 

237,  397 

Nebraska    Tel.    Co.    v.    Lin- 
coln, 82  Nebr.  59,  323 
Nebraska  Tel.   Co.   v.   State, 

55  Nebr.  627,  213,  444,  448 

Negley     v.     Henderson,     21 

Ky.  L.  1394,  22  Ky.  L.  912, 

323,  335 
Nelson   v.  Murfreesboro,   179 

Fed.    905,  149,    151 

New  Albany  Waterworks  v. 

Louisville     Banking     Co., 

122  Fed.  776,  350,  353 

Newburyport    Water    Co.    v. 

Newburyport,     168     Mass. 

541,  463 

Newcastle    v.    Lake    Erie    & 

W.   R.   Co.,   155   Ind.   18, 

397,   401 
Npw    Decatur    v.    Berry,    90 

Ala.  432,  1 

Newell    V.    People,    7    N.    Y. 

9,  71 

New  England  Tel.  &  T.  Co. 

V.    Boston    Terminal    Co., 

182  Mass.  397, 

173,  185,  287.  289,  397 
New   Hope  Tel.  Co.  v.  Con- 
cordia, 81  Kans.   514,     95,  111 
New  Memphis  Gas  &  Light 

Co.    V.    Memphis,    72    Fed. 

952,  444 

Npw  Orleans  &  N.  E.  R.  Co. 

V.    Meridian    Waterworks 

Co.,    72    Fed.    227, 

236,   241,    260.    447 
New    Orleans   City   &    L.    R. 

Co.    V.    New    Orleans,    44 

La.   Ann.  72S.         121,  138,  397 
New  Orleans  City  R.  Co.  v. 

Crescent    City    R.    Co.,    12 

Fed.  308.  121 


New  Orleans  Gaslight  Co.  v. 

Drainage    Commission    of 

New    Orleans,    197    U.    S. 

453,  397,   411 

New  Orleans  Gaslight  Co.  v. 

Louisiana  Light,  &c.,  Mfg. 

Co.,  115   U.   S.  650, 

95,  115,  422,  424 
N>w  Orleans  Gaslight  Co.  v. 

New  Orleans,  42  La.  Ann. 

188,  5 

New     Orleans     Waterworks 

Co.    V.    Rivers,    115    U.    S. 

674,  149,    163,    424 

Newport   v.   Commonwealth, 

106  Ky.   434,  318 

Newport    V.    Newport    Light 

Co.,  84  Ky.  166,  38,  149 

Newport  v.  Unity,  68  N.  H. 

587,  19,  323,  329 

New   York   v.   Bailey,   2   De- 

nio  433,  265 

New  York  v.   Bryan,  196  N. 

Y.  158,  95,  106 

New     York     v.     New     York 

City    R.    Co.,    193    N.    Y. 

543, 
New  York  &  Q.  E.  L.  &  P. 

Co.  V.  Long  Island  Mach. 

&    Mar.    Const.    Co.,    123 

App.  Div.  552, 
New      York      Tel.      Co.      v. 

Siegel-Cooper   Co.,    202    N. 

Y.  502,  213.  223 

Nichol  V.  Huntington  Water 

Co.,   53   W.  Va.   348,     236.   254 
Nicoll    V.    New    York    &    N. 

J.  Tel.  Co.,  62  N.  J.  L.  733.  2S7 
Nicoll    V.    R.    Co..    12    N.    Y. 

121.  1S6 

Niehaus  Bros.  Co.  v.  Contra 

Costa  Water  Co..  159  Cal. 

no.^,  236.  252 


95 


530 


xlii 


TABLE  OF   CASES. 


[References  are  to  Sections.] 


Nickerson  v.  Bridgeport 
Hydraulic  Co.,  46  Conn. 
24,  236 

Noblesville  v.  Noblesville 
Gas,  &.,  Co.,  157  Ind.  162, 

422,  435 

Norfolk  R.  &  Light  Co.  v. 
Corletto,  100  Va.  355,  397 

Norman  v.  Ince,  8  Okla.  412,  265 

Northwestern  Tel.  Exch. 
Co.  V.  Minneapolis,  81 
Minn.    140,  530,    545 

Norwich  Gas  &  Electric  Co. 
V.  Norwich,  76  Conn.  565,    32 

Norwich  Gaslight  Co.  v. 
Norwich  City  Gas  Co.,  25 
Conn.  19,  121,  128 


Mfg.     Co.     V.     New 
York,  206  N.  Y.  221,     265,  276 

Oconto  City  Water  Supply 
Co.  V.  Oconto,  105  Wis. 
76,  68 

Ogden  City  v.  Bear  Lake, 
&c..  Waterworks  Co.,  16 
Utah    440,  350,    355,    579 

Ogden  City  v.  Waterworks 
&  Irr.  Co.,  28  Utah  25, 

350,  357 

Ohio  ex  rel.  v.  Tel.  Co.,  36 
Ohio   St.   296,  560 

Old  Colony  Trust  Co.  v.  At- 
lanta, 83  Fed.  39,  88  Fed. 
859,  506 

Omaha  v.  Omaha  Water 
Co.,  218  U.  S.  180, 

372,  463,  474 

Omaha  Electric  Light  & 
Power  Co.  v.  Omaha,  172 
Fed.  494,  136,  139 


Omaha  Electric  Light  & 
Power  Co.  v.  Omaha,  179 
Fed.   455,  173,   176 

Omaha  Water  Co.  v.  Oma- 
ha, 147  Fed.  1,  6,  422,  426 

Omaha  Water  Co.  v.  Oma- 
ha, 162  Fed.  225,  95 

Opinion  of  the  Justices,  150 
Mass.   592,       19,  25,  32,  49,  51 

Opinion  of  the  Justices,  155 
Mass.    598,  19,   25 

Ottumwa  V.  City  Water 
Supply   Co.,   119   Fed.   315,    68 

Overall  v.  Madisonville,  125 
Ky.    684,  38,    41,    68,    82 

Owensboro  v.  Common- 
wealth, 105  Ky.  344,  336 

Owensboro  v.  Cumberland 
Tel.  &  T.  Co.,  174  Fed. 
739,  506,  508 

Owensboro  v.  Knox's  Admr., 
116  Ky.  451,  265,  270 

Owensboro  Waterworks  v, 
Owensboro,  29  Ky.  L. 
1118,  191  U.  S.  358,         68,  463 


Pacific  Postal  Tel.  Cable 
Co.  V.  Irvine,  49  Fed.  113,  287 

Pacific  R.  Co.  V.  Leaven- 
worth, 1  Dill.  393,  384 

Pacific  Tel.  &  T.  Co.  v.  An- 
derson, 196  Fed.  699,     556,  568 

Paducah  Lumber  Co.  v. 
Paducah  Water  Supply 
Co.,  89  Ky.  340,     236,  245,  260 

Palatka  Waterworks  v.  Pa- 
latka,  127  Fed.  161, 

444,   446,   463 

Palestine  v.  Siler,  225  111. 
630,  5,  9,  49,  52,  265 

Palmer  v.  Danville,  154  111. 
156,  530 


TABLE  OF  CASES. 


xliii 


[References  are  to  Sections.] 


Palmer  v.  Helena,  19  Mont. 
61,  68 

Palmer  v.  Larchmont  Elec- 
tric Co.,  158  N.  Y.  231, 

287,  301 

Paola  V.  Wentz,  79  Kans. 
148,  110 

Parfitt  V.  Furguson,  159  N. 
Y.  Ill,  121 

Paris  V.  Sturgeon,  50  Tex. 
Civ.  App.  519.  15 

Paris  V.  Tucker,  (Tex.  Civ. 
App.)   93  S.  W.  233,  265 

Parkersburg  v.  Brown,  106 
U.   S.  487,  58,  62 

Parkersburg  Gas  Co.  v. 
Parkersburg,  30  W.  Va. 
435,  121,  131 

Parkhurst  v.  Salem,  23  Ore. 
371,  121 

Parsons  v.  Van  Wyck,  67  N. 
Y.  S.  1054,  19,    24 

Peabody  v.  Westerly  Water- 
works, 20  R.   I.  176,  68 

Pearsall  v.  R.  Co.,  161  U.  S. 
646,  140 

Peck  V.  Schenectady  Rail- 
way Co.,  170  N.  Y.  298, 

303,  304 

Penley  v.  Auburn,  85  Maine 
278,  3 

People  V.  Albion  Water- 
works Co.,  121  N.  Y.  S. 
660,  213 

People  V.  Barnard,  110  N. 
Y.  548,  397,  530 

People  V.  Blocki,  203  III. 
363,  114 

People  V.  Broadway  R.  Co., 
126  N.  Y.  29,  372,  373 

People  V.  Chicago,  256  111. 
558,  3 

People  V.  Eaton,  100  Mich. 
208.  287,   305 


People    V.    Kerr,    27    N.    Y. 

188,  400 

People  V.  O'Brien,  111  N.  Y. 

1,  173,  186,  187,  372,  388 

People  V.  Walsh,  96  111.  253,  402 
People   ex   rel.   v.   Assessors 

of  Brooklyn,  111  N.  Y.  505, 

320,  323,  324 
People   ex   rel.   v.   Hess,   157 

N.  Y.  42,  323,  328 

People    ex    rel.    Binghamp- 

ton     Light,     &c.,     Co.,     v. 

Stevens,    203    N.    Y.    7, 

463,  467,  484 
People     ex     rel.     Brooklyn 

Heights    R.    Co.    v.    State 

Board  of  Tax  Comrs.,  127 

N.  Y.  S.   825,  463,  467 

People  ex  rel.  Central  Park, 

&c.,  R.  Co.  V.  Wilcox,  194 

N.    Y.   383,  95,   444 

Ppople    ex    rel.    Chicago    v. 

Chicago  Tel.   Co.,   220   111. 

238,  95,  103,  173,  177,  397 

People  ex   rel.   Fitzhenry   v. 

Union  Gas  &  Electric  Co., 

254  111.  395,  95,  350,  365 

People    ex    rel.    Jackson    v. 

Suburban   R.   Co.,   178   111. 

594,  95 

People      ex      rel.      Jamaica 

Water  Supply  Co.  v.  State 

Board  of  Tax  Comrs.,  196 

N.  Y.  39,  484,  496 

People    ex    rel.    Johnson    v. 

Barrows,  124  N.  Y.  S.  270,  213 
People    ex    rel.    Johnson    v. 

Earl,   42   Colo.   238,  95 

People  ex  rel.  Manhattan  R. 

Co.   V.    Woodbury,   203    N. 

Y.   231,  484,   495 

People   ex   rel.   Metropolitan 

St.  R.  V.  State  Board,  174 

N.    Y.    417,  95 


xli 


TABLE    OF    CASES. 


f 


[References  are  to  Sections.] 


People  ex  rel.  Murphy  v. 
Kelly,   76   N.   Y.   475, 

19,   22,   583 

P'-ople  ex  rel.  Queens  Coun- 
ty Water  Co.  v.  Wood- 
bury,  202  N.   Y.   619,     463,  468 

People  ex  rel.  Rockwell  v. 
Chicago  Tel.  Co.,  243  111. 
121,  95 

People  ex  rel  Schallberg  v. 
Central  Union  Tel.  Co., 
232  111.  260,  173,  178 

People  ex  rel.  Schwon  v. 
Chicago  &  A.  R.  Co.,  253 
111.   191,  68,  74 

Pnople  ex  rel.  Third  Ave.  R. 
Co.  V.  State  Board  of  Tax 
Comrs.,   198  N.   Y.   608, 

463,  484 

People  ex  rel.  Woodhaven 
Gaslight  Co.  v.  Deehan, 
153   N.    Y.    528, 

95,  103,  173,  186,  187 

People's  Electric  L.  &  P. 
Co.  V.  Capital  Gas  &  E. 
L.  Co.,  116  Ky.  76,  149 

People's  Gaslight  &  Coke 
Co.  V.  Chicago,  194  U.  S., 
1,  95,  444,  506 

People's  Passenger  R.  Co.  v. 
Memphis,  (Tenn.)  16  S. 
W.    973,  95,   99 

People's  Passenger  R.  Co.  v. 
Memphis  City  R.  Co.,  10 
Wall.  38,  99 

Peoria  R.  Co.  v.  Peoria  R. 
Terminal    Co.,   252    111.   73, 

95,  136,   141 

Pereria  v.  Wallace,  129 
Cal.  397,  121,  136,  138 

Perrigo  v.  Milwaukee,  92 
Wis.  236,  68,  80 

Pettengill  v.  Yonkers,  116 
N.   Y.   558,  265 


Phoenix   v.   Gannon,   195   N. 

Y.    471,  95,    105,    397 

Phoenix  Water  Co.  v.  Phoe- 
nix, 9  Ariz.  430  149 
Pierce    v.    Drew,    136    Mass. 

75,  287,  288,  305 

Pikes'    Peak    Power    Co.    v. 

Colorado  Springs,  105  Fed. 

1,  15,  397 

Pioneer    Tel.    &    T.    Co.    v. 

Westenhaver,      29      Okla. 

429,  463,    474,    484 

Piper  V.    Madison,   140  Wis. 

311,  265,  276 

Pittsburg,  C,  C.  &  St.  L.  R. 

Co.  V.  Muncie  &  Portland 

T.   Co.,  174  Ind.  167, 

287,  299 
Pittsburg,    &c.,    R.    Co.    v. 

Crown  Point,  146  Ind.  421,     11 
Planters'  Oil  Mill  v.  Monroe 

Waterworks   &  Light  Co., 

52  La.   Ann.   1243,'        236,   246 
Piatt  V.   San   Francisco,   158 

Cal.    74,  95 

Plattsburgh,    In    Re,    157    N. 

Y.   84,  68 

Plattsmouth      v.      Nebraska 

Tel.    Co.,    SO    Nebr.    460,       204 
Pocatello     V.      Murray,      173 

Fed.  382,  444,  445 

Pocatello      V.      Murray,      21 

Idaho   180,  463,  484,   497 

Pond  V.  New  Rochelle  Water 

Co.,  183  N.  Y.  330 

197,  205,  231,  232,  249,  422,  429 
Port   Jervis   Water   Co.   v. 

Port  Jervis,  151  N.  Y.  Ill, 

5,  68 
Portland  v.  Portland  Water 

Co.,   67   Maine   135,  320 

Portland    Nat.    Gas    Co.    v. 

State  ex   rel.,   135  Ind.   54,  197 


TABLE    OF    CASES. 


xlv 


[References  are  to  Heel  ions.] 


Port    of    Mobile    v.    Louis- 
ville &  N.  R.  Co.,  84  Ala. 

115,  189 

Portsmouth,  B.   &  S.   Water 

Co.     V.     Portsmouth,     112 

Va.    158,  95,    98 

Posey     V.     North     Birming- 
ham,   154   Ala.    511,  49 
Postal     Cable     Tel.     Co.     v. 

Cumberland  Tel.  &  T.  Co., 

177  Fed.  726, 

197,    213,    218,    463 
Postal     Tel.     Cable     Co.     v. 

Chicopee,    207    Mass.    341,  530 
Postal    Tel.     Cable    Co.    v. 

Eaton,  170   111.   513,       287,   300 
Postal     Tel.     Cable     Co.     v. 

Southern    R.   Co.,   89   Fed. 

190,  287 

Postal     Tel.     Cable     Co.     v. 

Taylor,    192    U.    S.    64,  530 

Potter    V.    Collis,    156    N.    Y. 

16,  121 

Powell   V.   Duluth,   91   Minn. 

53,  530 

Powell    V.   Duluth,   92   Minn. 

53,  213 

Powers    V.    Fall    River,    16S 

Mass.   60,  265 

President    &    Trustees.    &c., 

V.   Southern   Wisconsin   P. 

Co.,  149  Wis.  168,  218,  221 

Preston   v.   Board   of  Water 

Comrs.,   117  Mich.   589, 

213,  223 
Prince    v.    Quincy,    105    111. 

138,  68 

Prince    v.    Quincy,    12S,    111. 

443,  68 

Pryor,  In  Re,  55  Kans.  724. 

422,  433 
Public    Service    Commission 

V.  Westchester  St.  R.  Co., 

206   N.   Y.   209,  116 


Public  Service  Corp.  v.  Am. 

Lighting  Co.,  6<   N.  J.  Eq. 

122,  506,  522 

Public    Works    Co.    v.    Old 

Town,    102   Maine   306,  530 

Puget   Sound   Electric   R.   v. 

R.   Commission,  65   Wash. 

75,  463,   484 

Pullman    v.    New    York,    54 

Barb.    169,  42 


Quill  v.  New  York,  55  N.  Y. 

S.    889,  265 

Quincy  v.  Jones,  76  111.  231,  402 


R.  Commission  of  Louisi- 
ana V.  Cumberland  Tel.  & 
T.  Co.,  212  U.  S.  414, 

463,  470,  556,  569 
R    Co.  V.  Mayor,  &c.,  45  Ga. 

602,  401 

Rasch  V.  Nassau  Electric  R. 

Co.,  198  N.   Y.   385,       287,  303 
Ratcliff    V.    Wichita    Union 
Stockyards    Co.,    74    Kans. 
1,  416 

Read  v.  Atlantic  City,  49  N. 

J.   L.   558,  5 

Reagan  v.  Farmers  Loan  & 
Trust   Co.,    154   U.    S.    362, 

445,   596 
Reed    v.    Anoka,    85    Minn. 
I       294.  173 

I  Reed   v.   Syracuse,   83   Nebr. 
:       713,  265 

Redlands.  L.  &  C.  Domestic 
\  Water  Co.  v.  Redlands, 
i       121   Cal.   365,  484 

!  Revere   Water   Co.    v.    Win- 
j      throp.   192   Mass.    455,   207 
U.   S.  604,  149,  157 


xlvi 


TABLE    OF    CASES. 


[References  are  to  Sections.] 


Reynolds    v.    Waterville,    92 

Maine   292,  68,   70,   71 

Rhobidas  v.  Concord,  70  N. 

H.  90,  265 

Rice  V.  Detroit,  &c.,  R.,  122 

Mich,  677,  197,  202 

Rice   V.    St   Louis,    165    Mo. 

636,  265 

Richardson  Gas  &  Oil  Co.  v. 

Altoona,  79  Kans.  466,  149 

Richmond  v.  Richmond  Nat- 
ural Gas  Co.,  168  Ind.  82, 

422,  437,  506,  520 
Richmond   Natural   Gas   Co. 

V.    Clawson,   155   Ind.    659,  213 
Richmond,    &c.,    R.    Co.    v. 

Brown,  97  Va.   26,  98 

Risley    v.    Utica,    179    Fed. 

875,  149,  155 

Risser  v.  Hoyt,  53  Mich.  185,  372 
Riverside    &    A.    R.    Co.    v. 

Riverside,   118   Fed.   736,       15 
Roanoke   Gas   Co.   v.   Roan- 
oke, 88  Va.  810, 

397,  413,  530,  542 
Robbins  v.  Bangor  R.  &  E. 

Co.,    100   Maine   496,  530 

Robinson  v.  Mayor,  34  Am. 

Dec.   625,  184 

Rochester  v.   Coe,  49  N.  Y. 

S.   502,  320 

Rochester  v.  Rush,  80  N.  Y. 

302,  323,  328 

Rochester  Tel.  Co.  v.  Ross, 

195  N.  Y.  429,  197 

Rockebrandt   v.    Madison,    9 

Ind.  App.  227,  11 

Rockland      Water      Co.      v. 

Rockland,   83   Maine   267,    397 
Rogers  v.  Wickliffe,  29  Ky. 

L.   587,  15 

Rogers   Park   Water   Co.   v. 

Fergus,  178  111.  571,  180  U. 

S.  624,  506,  516 

Rome   v.   Cabot,   28   Ga.   50,    42 


Rumsey  v.  Philadelphia,  171 
Pa.   63,  265 

Rushville  v.  Rushville  Nat- 
ural Gas  Co.,  164  Ind.  162, 

422,  437 

Rbshville  Gas  Co.  v.  Rush- 
ville, 212  Ind.  206,  38 

Russell  V.  Chicago  &  Mil- 
waukee Electric  R.  Co., 
205  111.  155,  300 

Ryan  v.  Louisville,  133  Ky. 
714,  323,  336 


Safety     Insulated     Wire     & 

Cable     Co.     v.     Baltmore, 

66  Fed.  140,  5 

Saginaw     Gaslight     Co.     v. 

Saginaw,  28  Fed.  529, 

140,   149 
St.    Clair    County    Turnpike 

Co.  V.  Illinois,  96  U.  S.  63, 

173,  180,  181,  186 
St.    Clair    County    Turnpike 

Co.  V.   People,  »2  111.   174,  178 
St.    Germain   v.   Fall   River, 

177  Mass.  550,  265 

St.   Louis  V.   Belle  Tel.   Co., 

96  Mo.  623,  422,  434,  506 

St.  Louis  V.  Boffinger,  19  Mo. 

15,  11 

St.  Louis  V.   St.  Louis  Gas- 
light Co.,  70  Mo.  69, 

149,  160 
St.  Louis  V.  Western  Union 

Tel.  Co.,  149  U.  S.  465,        530 
St.    Louis    &    C.    R.    Co.    V. 

Postal    Tel.    Co.,    173    111. 

508,  149 

St.  Louis  Brewing  Assn.  v. 

St.  Louis,  140  Mo.  419, 

213,  530 


TABLE  OF  CASES. 


xlvii 


[References  are  to  Sections.] 


St.  Tammany  Waterworks 
Co.  V.  New  Orleans  Water 
Works   Co.,   120   U.   S.   64, 

95,  424 

Salt  Creek  Valley  Turnpike 
Co.  V.  Parks,  50  Ohio  St. 
568,  372 

Sammons   v.   Kearney   P.   & 

I.  Co.,  77  Nebr.  580,  7 
San    Antonio   v.    San   Anto- 
nio   St.    R.    Co.,    15    Tex. 
Civ.  App.   1,                            397 

San    Diego    Land    &    Town 

Co.    V.    Jasper,    189    U.    S. 

439,  110  Fed.  702, 

463,  484,  491 
San    Diego    Land    &    Town 

Co.   V.   National   City,   174 

U.  S.  739, 

422,  424,  444,  446,  463,  476, 

484,  491,  494,  506,  507 
San  Diego  Water  Co.  v.  San 

Diego,  118  Cal.  556, 

444,  463,  484 
San    Francisco    Gas    Co.    v. 

San  Francisco,  9  Cal.  453, 

5,  265 
Sapulpa    V.    Sapulpa    Oil    & 

Gas  Co.,  22  Okla.  347,         136 
Saratoga    Springs    v.    Sara- 
toga Gas,  &c.,  Co.,  190  N. 

Y.  562,  191  N.  Y.  123,  598 

Schaaf  v.  Cleveland,  M.  &  S. 

II.  Co.,   66   Ohio   St.   215, 

287,   314 
Schnell  v.   Rock  Island,  232 

III.  89,  68,  75 
Scott  V.   La  Porte,   162   Ind. 

34,  15 

Scranton    G.    &    W.    Co.    v. 

Scranton,  214  Pa.  5So,  397 
Sears  v.   Crocker,  184  Mass. 

586,  287,  290 


Seattle  v.  Columbia  &  P.  S. 

R.   Co.,   6  Wash.   379, 

173,  189,  397 
Secor  V.  Lord,  42  N.  Y.  525,  232 
Selectmen    of    Amesbury    v. 

Citizens'    Electric    St.    R. 

Co.,    199   Mass.    394,  95 

Seward  v.  Rochester,  109  N. 

Y.    166,  265 

Seymour  v.  Tacoma,  6  Wash. 

427,  68 

Shaw  Stocking  Co.  v.  Low- 
ell, 199  Mass.  118,  530,  534 
Sheehan      v.      Boston,      171 

Mass.  296,  265 

Shelbyville     Water     Co.     v. 

People,  140  111.   545,  323 

Sheward   v.   Citizens'   Water 

Co.,  90  Cal.  635,  530 

Shreveport   Traction   Co.    ,v. 

Kansas  City,   &c.,   R.   Co., 

119   La.    759,  397 

Shreveport    Traction    Co.    v. 

Shreveport,   122   La.   1,  95 

Silkman  v.  Board  of  Water 

Comrs.,    of    Yonkers,    152 

N.  Y.  327,       213,  227,  463,  484 
Sioux     Falls     v.      Farmers' 

Loan    &     Trust    Co.,    136 

Fed.  721,  173 

Skaneateles  Waterworks  Co. 

V.   Skaneateles,   161   N.   Y. 

154,  184  U.  S.  354,  95,  104 

Sh>baugh  v.  Omaha  Electric 

Light  &   P.   Co.,   87   Nebr. 

805,  197,  204 

Smith  v.  Birmingham  Water- 
works Co.,  104   Alf..   315, 

530,   533 
Smith    v.    Capital    Gas    Co., 

132  Cal.  209,  530 

Smith  V.  Dedham,  144  Mass. 

177,  68 

Smith   V.   Goldsboro.   121   N. 

Car.  350,  287 


:lviii 


TABLE   OF    CASES. 


[References  are  to  Sections.] 


Smith    V.    Madison,    7    Ind. 

86,  10 

Smith   V.   McDowell,   148  111. 

51,  397,    402 

Smith  V.  Nashville,  88  Tenn. 

464,  42,   45,   323,   332 

Smith    V.    Newbern,    70    N. 

Car.    14,  1 

Smith     V.     Philadelphia,     81 

Pa.    38,  265 

Smith    V.    Seattle,   25   Wash. 

300,  530 

Smith  V.   Westerly,  19  R.   I. 

437,  121,  123 

Smyth    V.    Ames,    169    U.    S. 

466,  416,   454,  463,  465, 

484,  493,  494 
Snell     V.     Clinton     Electric 

Light,  Heat  &  Power  Co., 

196    111.    626,  213 

Siiouffer    V.    Cedar    Rapids, 

&  M.  C.   R.   Co.,  118  Iowa 

287,  4 

Somerset  v.   Smith,   105  Ky. 

678,  154,  173,   183 

Somerville  v.   Waltham,   170 

Mass.   160,  323,  325 

Scuth     Buffalo     R.     Co.     v. 

Kirkover,  176  N.  Y.   301,     303 
South     Carolina    v.     United 

States,  199  U.  S.  437,     317,  323 
South      McAlester  -  Euf aula 

Tel.  Co.  V.  State,  25  Okla. 

524,  506 

South      Pasadena      v.      Los 

Angeles   Terminal   R.   Co., 

109  Cal.  315,  397,  408,  612 

South  Pasadena  v.  Pasadena 

L.  &  W.  Co.,  152  Cal.  579, 

350,  361 
Southeast   v.    New   York,   89 

N.   Y.   S.   630,  265 

Souther    v.    Gloucester,    187 

Mass.  552,  197,  213,  226 


Souther  Iron  Co.  v.  Laclede 

Power   Co.,    109   Mo.    App. 

353,  530 

Southern    Bell    Tel.    Co.    v. 

Francis,    109   Ala.    224,  287 

Southern  Bell  Tel.  &  T.  Co. 

V.    Harrisonburg,    111    Va. 

494,  323 

Southern  Bell  Tel.  &  T.  Co. 

V.    Mobile,   162   Fed.    523,       95 
Southwestern  Tel.  &  T.  Co. 

V.    Luckett,    (Tex.)    127    S. 

W.    856,  213 

Southwestern   Tel.  &  T.   Co. 

V.  Wayne,  86  Ark.  548,  11 

Spaulding      v.      Lowell,      23 

Pick.  (Mass.)  71, 

1,  11,  15,  49 
Spaulding    v.    Peabody,    153 

Mass.   129,  44,  49,  51 

Spokane  v.  Colby,  16  Wash. 

610,  287 

Springfield    v.    Postal    Tel.- 

Cable   Co.,    253    111.    346,       530 
Springfield    Fire    &    Marine 

Ins.  Co.  V.  Keeseville,  148 

N.  Y.   46,  3 

Spring  Valley  Water  Co.  v. 
!       San    Francisco,    165    Fed. 
1       667,    444,  447,  453,  484,  490,  506 
Spring    Valley    Waterworks 

V.  San  Francisco,  124  Fed. 

574,  444,   463,   484,  488 

Spring    Valley    Waterworks 

V.  San  Francisco,  192  Fed. 

137,  444,   453,   463,   484 

Spring    Valley    Waterworks 

V.    San   Francisco,   82   Cal. 

286,  530 

Spring    Valley    Waterworks 

V.  Schottler,  110  U.  S.  347, 
416,   422,  425,   463,  506,   509 
Springville     v.     Fullmer,     7 

Utah   450,  38 


TABLE  OF  CASES, 


xlix 


[References  are  to  Sections.] 


Stack   V.   East  St.   Louis,  85 

111.  377,  402 

Stanislaus     County     v.     San 

Joaquin   &  K.   R.   C.   &   L 

Co.,  192  U.  S.  201,         463,  4S4 
Stanley     v.     Davenport,     54 

Iowa  463,  397,  403 

State    V.    Barnes,    22    Okla. 

191,  19,    27 

State  V.   Columbus  Gaslight 

&   Coke   Co.,   34   Ohio   St. 

573,  530 

State     V.     Consumers'     Gas 

Trust   Co.,   157   Ind.   345, 

197,  213,  224 
State    V.    Graeme,    130    Mo. 

App.   138,  197,   203 

State  V.  Harrison,  46  N.  J. 

L.    79,  154 

State  V.  Jacksonville  St.   R. 

Co.,  29  Fla.  590,  397,  401 

State    V.    Kenosha    Electric 

R.  Co.,  145  Wis.  337,  609 

State  V.  Lawrence,  79  Kans. 

234,  42 

State  V.  Madison  St.  11.  Co., 

72  Wis.  612,  399 

State  V.   Nebraska   Tel.   Co., 

17  Nebr.  126,  213,  556 

State    V.    Noyes,    47    Maine 

189,  •  189 

State  V.  Portage  City  Water 

Co.,    107   Wis.    441,  399 

Slate    V.    Portland    Gen.    El. 

Co.,   52   Ore.    502,  350,   361 

State     V.     Sedalia     Gaslight 

Co.,  44  Mo.  App.  501,  530 

State   ex    rel.    v.    Allen,    178 

Mo.  555,  19 

State   ex   rel.    v.    Toledo,   48 

Ohio  St.  112, 

19,  26,  32,  323,  330 
State   ex   rel.,   &c.,   v.   Daw- 
son,  16  Ind.  40,  375 


State  ex  rel.  Atty.  Gen.  v. 
Cincinnati  Gaslight  & 
Coke  Co.,  18  Ohio  St.  262, 

129,   149,   151,   444 

State  ex  rel.  Ellis  v.  Tampa 
Waterworks  Co.,  56  Fla. 
858,  95 

State  ex  rel.  Ferguson  v. 
Birmingham  Waterworks 
Co.,   164   Ala.   586,         213,   222 

State  ex  rel.  Garner  v. 
Missouri  &  K.  Tel.  Co., 
189  Mo.  83,  422,  434,  506 

State  ex  rel.  Goodwine  v. 
Cadwallader,  172  Ind.  619, 

556,  559,  560,  566,  568 

State  ex  rel.  Gwynn  v.  Citi- 
zens' Tel.  Co.,  61  S.  Car. 
83,  213,  217 

State  ex  rel.  Hallauer  v. 
Gosnell,  116  Wis.  606, 

530,  539,  463 

State     ex     rel.     Hallett     v. 
Seattle    Lighting    Co.,    60 
i      Wash.  81,  530 

State  ex  rel.  Hamilton  Gas 
&  Coke  Co.  v.  Hamilton, 
47   Ohio  St.   52,  149 

State  ex  rel.  Latshaw  v. 
Board  of  Water  &  Light 
Comrs.,  105  Minn.  472,  213,  220 

State  ex  rel.  Mason  v.  Con- 
sumers' Power  Co.,  119 
Minn.  225,  213 

State  ex  rel.  McClaugherty 
V.  Bluefleld  W.  &  I.  Co., 
67  W.  Va.  285,  530 

State  ex  rel.  Means  v.  Hi- 
awatha, 53  Kans.  477,  11 

State  ex  rel.  Milsted  v. 
Butte  City  Water  Co.,  18 
Mont.  199,  197 

State  ex  rel.  Port  Townsend 
I      V.  Clausen,  40  Wash.  95,       68 


TABLE    OF    CASES. 


[References  are  to  Sections.} 


State  ex  rel.  St.  Louis  v. 
Laclede  Gaslight  Co.,  102 
Mo.  472,  422,  438 

State  ex  rel.  St.  Louis  Un- 
derground Service  Co.  v. 
Murphy,  134  Mo.  548,    397,  530 

State  ex  rel.  St.  Paul  v.  Min- 
nesnta  Transfer  R.  Co.,  80 
Minn.   108,  173 

State  ex  rel.  Sheets  v.  Toledo 
Home  Tel.  Co.,  72  OhiO  St. 
60,  506 

State  ex  rel.  Smythe  v.  Mil- 
waukee Independent  Tel. 
Co.,  133  Wis.  588,  397,  506 

State  ex  rel.  Snyder  v.  Port- 
land Natural  Gas  &  Oil 
Co.,    153    Ind.    483,  213 

State  ex  rel.  South  Bend  v. 
Mountain  Spring  Co.,  56 
Wash.  176,  213 

State  ex  rel.  Tarr  v.  Crete, 
32  Nebr.  568,  68 

State  ex  rel.  Webster  v.  Su- 
perior Court  of  King  Co., 
67  Wash.   37,  611 

State  ex  rel.   Weise  v.   Seda- 
11a    Gaslight   Co.,   34   Mo. 
App.  501,  451 

State  ex  rel.  Wisconsin  Tel. 
Co.  V.  Sheboygan,  111  Wis.  23, 
399,  422,  435 

State  (Hudson  Tel.  Co.)  v. 
Jersey  City,  49  N.  J.  L.  303, 

173.  188 

State  Journal  Printing  Co. 
V.  Madison,  148  Wis.  396, 

265,  271 

State,  Trenton  Horse  R.  Co. 
V.  Trenton,  53  N.  J.  L.  132, 

397,  413 

State,  Water  Comrs.  of  Jer- 
sey City  V.  Gaffney,  34  N. 
J.   L.   131,  325,  329 


Stedman  v.   Berlin,  97  Wis. 

505,  68 

Stein   V.   McGrath,    128   Ala. 

175,  372 

Stevens    v.    Muskegon,    111 

Mich.  72,  95,  107 

Stewart  v.  Ashtabula,  98  Fed. 

516,    107    Fed.    857,  372 

Stillwater  Water  Co.  v.  Still- 
water, 50  Minn.   498,  397 
Stites    V.    Norton.    125    Ky. 

672,  506 

Stock  V.   Boston,   149   Mass. 

410,  265 

Stockwell  V.  Rutland,  75  Vt. 

76,  265 

Stoddard  v.  Winchester,  157 

Mass.    567,  265 

Stone   V.    Farmers   Loan    & 

Trust  Co.,  116  U.  S.  307,      596 
Stowers  v.  Postal  Tel.  Cable 

Co.,  68  Miss.  559,  287 

Suburban   Electric   L.   &   P. 

Co.  V.  East  Orange  Tp.,  59 

N.  J.  Eq.  563,  173,  188 

Sullivan  v.  Bailey,  125  Mich. 

104,  173,  181 

Sumner  County  v.  Welling- 
ton, 66  Kans.  590,  323,  331 
Sun   Printing   &   Publishing 

Assn.  V.  New  York,  152  N. 

Y.   257,  11,  13,  19,  23, 

25,  42,  43,  i,86,  582,  585 
Superior  v.  Douglas  County 

Tel.  Co.,  141  Wis.  363,  95 

Sutherland-Innes       Co.       v. 

Evart,  86  Fed.   597,  58 

Swanberg  v.  New  York  City, 

123  App.  Div.   774,  530 

S'^'anson    v.    Ottumwa,    118 

Iowa  161,  68 

Swanton  v.  Highgate,  81  Vt. 

152,  323,  338 


TABLE   OF   CASES. 


[References  are  to  Sections.] 


Syracuse  Water  Co.  v.  Syra- 
cuse, 116  N.  Y.  167,  154  U. 
S.   519,  121,  130 


Tacoma  Gas  &  Electric  Co. 

V.  Tacoma,  14  Wash.  288, 

422,  438 
Tacoma  Hotel  Co.  v.  Tacoma 

Light     &     Water     Co.,     3 

Wash.    St.    316,  5 

Taggart   v.    Newport   St.    R. 

Co.,  16  R.  1.  668,  287 

Tampa  v.   Kaunitz,   39   Fla. 

683,  323,  344 

Tarver    v.    Dalton,    134    Ga. 

462,  323 

Taylor  v.  Carondelet,  22  Mo. 

110,  11 

Taylor     v.     Public     Service 

Corp.,    75    N.    J.    Eq.    371, 

287,  307 
Telegraph  Co.  v.  Smith  (Md.) 

18  Atl.  910,  287 

Terrell   v.   Louisville   Water 

Co.,   127   Ky.   77,  265,  266 

Terry  v.  New  York,  8  Bosw. 

504,  265 

Texarkana    v.    Southwestern 

Tel.  &  T.  Co.,  48  Tex.  Civ. 

App.    16,  397,  407,  612 

The  Maggie  P,  25  Fed.  202, 

4,    15 
Tbeis  V.  Spokane  Falls  Gas- 
light   Co.,    49    Wash.    477, 

350,  363 
Theobold  v.  R.  Co.,  66  Miss. 

279,  293 

Thomas  v.   Grand  Junction, 

13  Colo.  App.   SO,      11,  13,  149 
Thompson  v.  San  Francisco 

Gas  &  Electric  Co.,  IS  Cal. 

App.  30,  213 


Thompson  v.  Schenectady 
R.  Co.,  124  Fed.  274,      372,  379 

Thomson  -  Houston  Electric 
Co.  v.  Newton,  42  Fed. 
723,  42 

Thrift  V.  Elizabeth  City,  122 
N.  Car.  31  121,  124 

Tillamook  Water  Co.  v.  Til- 
lamook City,  139  Fed.  405,  149 

Tillamook  Water  Co.  v.  Til- 
lamook City,  150  led.  117,  149 

Toledo  V.  Hosier,  54  Ohio 
418,  323,  330 

Toledo  V.  Yeager,  8  Ohio  C. 
C.  318,  323,  330 

Toledo  Consolidated  St.  R. 
Co.  V.  Toledo  Electric  St. 
R.  Co.,  50  Ohio  St.  603,      372 

Topeka  Water  Co.  v.  Whit- 
ing, 58  Kans.  639,  265 

Toll  Roads  Co.  v.  People,  22 
Colo.  429,  181 

Torrent  v.  Muskegon,  47 
Mich.  115,  11.    12 

Townsend  v.  Boston,  187 
Mass.  283,  19,    25 

Trammell  v.  Russellville,  34 
I      Ark.  105,  107 

Truesdale  v.  Newport,  28  Ky. 
L.  840,  173 

Tulsa  St.  R.  Co.  v.  Okla- 
homa Union  Traction  Co., 
27  Okla.  339,  136,  143 

Twitchell  v.  Spokane,  55 
Wash.  86  444,  450 


Ukiah  City  v.  TJklah  Water 
&  Improvement  Co.,  142 
Cal.    173,        236,   260,    261,  263 

Underground  R.  R.  v.  New 
York,  116  Fed.  952,  193  U. 
8.   416,  585 


lii 


TABLE    OF    CASES. 


[References  are  to  Sections.] 


United  States  v.  New 
Orleans,  98  U.  S.  381,  7 

United  States  v.  Sault  Ste. 
Marie,  137  Fed.  258,  3 

United  States  Tel.  Co.  v. 
Central  Union  Tel.  Co.,  171 
Fed.   130.  556,  560,  568 


Valparaiso  v.  Gardner,  97 
Ind.  1,  11,    68 

Vanderburg  v.  Kansas  City, 
Mo.,  Gas  Co.,  126  Mo.  App. 
600,  95,  213 

Vicksburg  v.  Vicksburg  Wa- 
terworks Co.,  202  U.  S.  453, 

149,  166 

Vicksburg  v.  Vicksburg  Wa- 
terworks Co.,  206  U.  S. 
496,  11,  513 

Vicksburg  Waterworks  Co. 
V.  Vicksburg,  185  U.  S.  65,  163 

Vilas  V.  Manila,  220  U.  S. 
345,  174 

Vincennes  v.  Citizens'  Gas 
Light  Co.,  132  Ind.  114, 

5,  11,  13,  149 

Vinton-Roanoke  Water  Co. 
V.  Roanoke,  110  Va.  661,      98 

Voss  V.  Waterloo  Water  Co., 
163  Ind.  69,  68,     69 


W 

Wabaska  Electric  Co.  v.  Wy- 

more,  60  Nebr.  199,  422,  433 
Wadsworth  v.   Concord,   133 

N.    Car.   587,  42 

Wagner  v.  Bristol  Belt  Line 

R.  Co.,  108  Va.  594,  287 

Wagner  v.  Rock  Island,  146 

111.   139,  5,  9,  213,  530 


Wainwright  v.  Queens  Coun- 
ty Water  Co.,  28  N.  Y.  S. 
987,  236,  249 

Wakefield  v.  Theresa,  125 
App.   Div.    38,  372,  388 

Walker  v.  Cincinnati,  21 
Ohio  St.   14,  32,    34 

Walla  Walla  v.  Walla  Walla 
Water  Co.,  172  U.  S.  1, 
68,  86,  149,  156,  163,  165,  424 

Wannamaker  v.  Rochester, 
44  N.  Y.   St.   45,  265 

Warren  v.  Chicago,  118  111. 
329,  11,     42 

Washburn  Waterworks  Co. 
V.  Washburn,  129  Wis.  73, 

397,  530 

Washington  v.  Washington 
Water  Co.,  70  N.  J.  Eq. 
254,  213 

Water  Comrs.  v.  Hudson,  13 
N.  J.  Eq.  420,  397 

Water,  Light  &  Gas  Co.  v. 
Hutchinson,  144  Fed.  256, 
207  U.   S.   385,         121,  125,  149 

Waterbury  v.  Laredo,  68 
Tex.  565,  11,     14 

Watson  V.  Neeham,  161 
Mass.    404,  265 

Wayland  v.  Comrs.  of  Mid- 
dlesex Co.,  4  Gray  (Mass.) 
500,  323,  327 

Weld  V.  Gas  &  Electric  Light 
Comrs.,  197  Mass.   556,         610 

Wellston  V.  Morgan,  59  Ohio 
St.  147,  154,  173,  184,  372 

Welsh  V.  Rutland,  56  Vt.  228,  265 

West  Hartford  v.  Board  of 
Water  Comrs.,  44  Conn. 
360,  323,  330 

Westerly  Waterworks  v. 
Westerly,  75  Fed.  181,  121,  126 

Western  P.  &  S.  Co.  v.  Citi- 
zens' St.  R.  Co.,  128  Ind. 
531,  113,  431 


TABLE  OF  CASES. 


liii 


[References  are  to  SectiOTis.] 


Western    Savings    Fund    So- 
ciety   V.    Philadelphia,    31 

Pa.    1S3.  265 

Western    Union    Tel.    Co.    v. 

American  Union  Tel.   Co., 

65  Ga.  160,  149,  158 

Western   Union    Tel.    Co.    v. 

Chicago  &  Paducah  R.  Co., 

86   111.    246,  149,  556 

Western    Union    Tel.    Co.    v. 

Richmond,  224  U.  S.  160,     530 
Western    Union    Tel.    Co.    v. 

Williams,   86  Va.   696,  287 

Westfield  Gas  &  Milling  Co. 

V.  Mendenhall,  142  Ind.  538, 

197,  199,  422,  432 
Westminster    Water    Co.    v. 

Westminster,   98   Md.    551, 

149,  163 
Wheeler    v.     Cincinnati,    19 

Ohio  St.  19,  4 

WTieeler  v.   Philadelphia,   77 

Pa.  338,  7 

Wheeling  &  E.  G.  R.  Co.  v. 

Triadelphia,  58  W.  Va.  487, 

97,  372,  878 
Wheelock     v.     Lowell,     196 

Mass.   220,  15 

Wichita  v.  Old  Colony  Trust 

Co.,  132  Fed.  641,  95,  112 

Wilcox    V.    McClellan,    185    N. 

Y.    9,  95 

Wilkins   v.    Rutland,   61    Vt. 

336,  265 

Wilkinson  v.  Light,  Heat  & 

Water  Co.,  78  Miss.  389,       236 
Willcox  V.  Consolidated  Gas 

Co.,  212  U.  S.   19, 

463,  464,  472,  484,  486,  488,  489 
Williams  v.  Mutual  Gas  Co., 

52  Mich.  499.  213 

Wilson     V.     Mitchell,     17    S. 

Dak.   515,  265 


Wilson  V.  Tallahassee  Wa- 
terworks Co.,  47  Fla.  351, 

213,  444,  451 

Wiltse  V.  Red  Wing,  99 
Minn.  255,  265,  275 

Winchester  v.  Redmond,  93 
Va.  711,  11,    14 

Windsor  v.  Des  Moines,  110 
Iowa   175,  68 

Winona  v.  Botzet,  169  Fed. 
321,  265,  275 

Winston  v.  Spokane,  12 
Wash.   524,  68,    77 

Woodbridge  v.  Duluth,  57 
Minn.    256,  68 

Woodbury  v.  Tampa  Water- 
works Co.,  57  Fla.  243,  236,  242 

Worden  v.  New  Bedford,  131 
Mass.    23,  15 

Weight  V.  Glen  Tel.  Co.,  95 
N.   Y.   S.   101,  213 

V.'right  V.  Glen  Tel.  Co.,  99 
X.  Y.  S.  85,  95,     102 

Wyandotte  v.  Corrigan,  35 
Kans.  21,  397 

Wyandotte  Electric  Light 
Co.  V.  Wyandotte,  124 
Mich.   43,  173,  180 


Yancey     v.     Batesville     Tel. 

Co.,  81  Ark.  486,  213 

Yates  V.  Van  De  Bogert,  56 

X.  Y.  526,  186 

Yazoo    City    v.    Birchett,    89 

Miss.    700,  265 

Yik    Hon    v.    Spring    Valley 

Waterworks,  65  Cal.  619,  265 
York   Tel.   Co.  v.   Keesey,   5 

Pa.  Dist.  R.  366,  287 

Ysleta  V.  Babbitt,  8  Tex.  Civ. 

App.   432,  265 


liv 


TABLE    OF    CASES. 


[References  are  to  Sections.] 


Zanesville  v.  Zanesville  Gas- 
light  Co.,   47    Ohio   1, 

416,  422,  506 


Zanesville  v.  Zanesville  Tel. 
&   T.   Co.,   64  Ohio  67, 

95,  101,  422 


TABLE  OF  CASES-SUPPLEMENTARY 


Appleton  Waterworks  Co. 
V.  Railroad  Commission, 
(Wis.)  142  N.  W.  476,  463,  484 

Asbury  v.  Albemarle,  (N.  C.) 
78  S.  E.  146,  11 

Attorney  General  v.  Haver- 
hill Gaslight  Co.,  (Mass.) 
101  N.  E.  1061,  350 

Baum  V.  Somerville  Water 
Co.,   (N.  J.)    87  Atl.  140,      236 

Bell  V.  David  City,  (Neb.) 
142  N.  W.  523,  15,  136 

Birmingham  R.,  Light  & 
Power  Co.  v.  Smyer, 
(Ala.)   61  So.  354,  287 

Board  of  Water  Commis- 
sioners, In  re,  (Conn.) 
87  Atl.  870,  3,     19 

Boise  Artesian  H.  &  C. 
Water  Co.  v.  Boise  City, 
U.  S.  Adv.  Sh.  Aug.  1, 
1913,  p.  997,  173 

Brownwood  v.  Brown  Tel. 
&  T.  Co.,  (Tex.)  157  S.  W. 
1163,  506 

California-Oregon  Power 
Co.  V.  Grants  Pass,  203 
Fed.  173,  506 

Carson  v.  Ft.  Smith  Light 
&  Traction  Co.,  (Ark.) 
158  S.  W.  129,  197 

■Charleston  Consol.  R.,  etc. 
Co,  V.  Charleston,  92  S.  C. 
127,  95,  397,  422 


Clairton  Steel  Co.  v.  Manu- 
facturers' Light  &  Heat 
Co.,  (Pa.)  87  Atl.  998,  213 

Cumberland  Tel.  &  T.  Co.  v. 
Brandon,  (Ky.)  157  S.  W. 
1119,  556 

Cumberland  Tel.  &  T.  Co.  v. 
Memphis,  200  Fed.  657,        506 

Davis  V.  Rockport,  (Mass.) 
100  N.  E.  612,  5,     15 

De  Motte  v.  Valparaiso,  161 
Ind.  319,  350 

Denver  v.  Mercantile  Trust 
Co.,  201  Fed.  790,  173 

Denver  v.  New  York  Trust 
Co.,  229  U.  S.  123,  372 

Detroit  United  R.  v.  De- 
troit, 229  U.  S.  39,  173,  372 

Dolan  V.  Puget  Sound  Trac- 
tion, Light  «S;  Power  Co., 
(Wash.)    130  Pac.   353, 

Egan  V.  San  Francisco, 
(Cal.)  133  Pac.  294, 

Emporia  v.  Emporia  Tel. 
Co.,  88  Kans.   443,  422 

Fall  River  Gas  Works  Co. 
V.  Board  of  G.  &  E.  L. 
Comrs.,  (Mass.)  102  N.  E. 
475,  484 

Ft.  Smith  Light  &  Traction 
Co.  V.  Ft.  Smith,  202  Fed. 
581,  422,  506 


95 


38 


TABLE   OF   CASES. 


Iv 


[References  are  to  Sections.'] 


Glenwood  Springs  v.  Glen- 
wood  Light  &  W.  Co.,  202 
Fed.  678,  136 

Grand  Trunk  W.  R.  Co.  v. 
South  Bend,  227  U.  S.  544, 

96,  530 

Greensburg  Borough  v. 
Westmorland  Water  Co., 
(Pa.)  87  Atl.  995,  350 

Gregg  V.  Laird,  (Md.)  87 
Atl.  1111,  422 

Hall  V.  Passaic  Water  Co., 
(N.  J.)  85  Atl.  349,  236 

Hoffman  v.  Mitchell,  201 
Fed.  506,  397 

Hopper  V.  Willcox,  (N.  Y.) 
140  N.  Y.  S.  277,  463,  484 

Joplin  V.  Wheeler,  (Mo.)  158 
S.  W.  942,  506,  530 

Krom  V.  Antigo  Gas  Co., 
(Wis.)  140  N.  W.  41,  236 

Madera  Waterworks  v.  Ma- 
dera,   228   U.    S.    454,  136 

Milwaukee  Electric  R.  &  L. 
Co.  V.  Railroad  Commis- 
sion, (Wis.)  142  N.  W. 
491,  95,  506 

Minden-Edison  Light  & 
Power  Co.  v.  Minden, 
(Neb.)  142  N.  W.  673,  136 

Montgomery  v.  Greene, 
(Ala.)  60  So.  900,  213 

New  Hartford  Water  Co.  v. 

Village  Water  Co.,  (Conn.) 
87  Atl.  358,  136 

New  York  Electric  Lines 
Co.,   In   re,  201   N.   Y.   321,     95 

Old  Colony  Trust  Co.  v. 
qmaha,  U.  S.  Adv.  Sh. 
Aug.   1,  1913,  p.  967,  173 

Owensboro  v.  Cumberland 
Tel.  &  T.  Co.,  U.  S.  Adv. 
Sh.  Aug.  1,  1913,  p.  988,     173 


People  ex.  rel.  Delaware  & 
H.  Co.  V.  Stevens,  197 
N.  Y.  1,  484 

People  ex  rel.  Kings  County 
Lighting  Co.  v.  Willcox, 
(N.    Y.)    141   N.    Y.   S.    677, 

463,  484 

People  ex  rel.  New  York 
Edison  Co.  v.  Willcox,  207 
N.  Y.  86,  422,  612 

People  ex  rel.  New  York 
Electric  Lines  Co.  v.  Elli- 
son, 188  N.  Y.  523,  530 

People  ex  rel.  New  York 
Tel.  Co.  v.  Public  Service 
Commission,  (N.  Y.)  141 
N.  Y.  S.  1018,  213 

People  ex  rel.  Third  Ave.  R. 
Co.  V.  Public  Service 
Commission,  203  N.  Y. 
299,  95,  484 

People  ex  rel.  Westchester 
St.  R.  Co.  V.  Public  Serv- 
ice Commission,  (N.  Y.) 
143  N.  Y.  S.  148,  95,  484 

Piatt,  ex  parte,  (Okla.)  134 
Pac.  53,  95 

Pioneer  Tel.  &  T.  Co.  v. 
State,  (Okla.)  134  Pac. 
398,  556 

Pocatello  V.  Murry,  206  Fed. 
72,  95,  372,  530 

Public  Service  Gas  Co.  v. 
Board  of  Public  Utility 
Comrs.,  (N.  J.)  87  Atl.  651, 

463,  484 

Russell,  ex  parte,  163  Cal. 
668,  95.  397.  422.  506 

St.  Mary's  v.  Hope  Natural 
Gas  Co.,  (W.  Va.)  76  S.  E. 
841,  96,  422 

St.  Paul  Realty  &  Assets  Co. 
V.  Tri-State  Tel.  &  T.  Co., 
(Minn.)    142  N.  W.  S07.        197 


Ivi 


TABLE   OF    CASES. 


[References  are  to  Sections.'\ 


Shawnee  Gas  &  Electric  Co. 
V.  Corporation  Commis- 
sion, (Okla.)  130  Pac.  127,  422 

Simpson  v.  Shepard,  229 
U.  S.  — ,  463,  484 

Southwestern  Tel.   &  T.   Co. 
V.   State,    (Tex.   Civ.  App.)   " 
150  S.  W.   604,  556 

State  ex  rel.  Atty.  Gen.  v. 
Wyandotte  County  Gas 
Co.,  88  Kans.  165,  422 

State  ex  rel.  County  Atty.  v. 
Des  Moines  City  R.  Co., 
(Iowa)  140  N.  W.  437  173 

State  ex  rel.  St.  Paul  v.  St. 
Paul  City  R.  Co.,  (Minn.) 
142  N.  W.  136,  213,  530 


State  ex  rel.  W.  J.  Arm- 
strong Co.  V.  Waseca, 
(Minn.)  142  N.  W.  319,  197,  213 

Union  Trust  &  Savings 
±5ank  V.  Kinloch  Long- 
Distance  Tel.  Co.,  258  111. 
202,  556 

United  States  Tel.  Co.  v. 
Central  Union  Tel.  Co., 
202  Fed.  66,  556 

Washington-Oregon  Corp.  v. 
Chehalis,  202   Fed.   591,        136 

Wood  V.  New  York  Interur- 
ban  Water  Co.,  (N.  Y.) 
142  N.   Y.   S.   626,  197 


THE  LAW  OF  PUBLIC  UTILITIES 


CHAPTER  I. 

INTRODUCTION. 

One  of  the  most  marked  characteristics  of  modern 
civilization  is  the  unparalleled  growth  and  develop- 
ment of  municipal  activity,  which  has  been  both  ex- 
tensive and  intensive.  Municipalities  have  increased 
not  only  in  number  but  also  in  size.  Municipal 
problems  are  becoming  of  vital  personal  interest  to 
greater  and  still  greater  numbers  of  persons,  and  their 
solution,  which  is  constantly  becoming  more  diffi- 
cult and  more  necessary,  will  directly  affect  the  larger 
and  more  influential  portion  of  our  population. 

The  solution  of  many  of  these  problems  lies  in  the 
extension  of  the  sphere  of  municipal  activity.  At  one 
time  the  municipal  corporation  like  the  government 
as  a  whole  was  regarded  as  an  organization  which 
should  preserve  order  and,  within  the  limits  of  the  law 
which  it  was  its  duty  to  enforce,  permit  the  greatest 
possible  freedom  of  action  to  the  individual  from  whose 
unlimited  initiative  and  energetic  activity  it  was  be- 
lieved the  community  as  a  whole  would  derive  the 
utmost  advantage. 

Unlimited  or  insufficiently  regulated  individual  ac- 
tivity, however,  resulted  in  such  evils  that  it  was  found 
necessary  to  resort  more  and  more  to  the  repressive 
activity  of  the  municipal  as  well  as  the  state  govern- 
ment.    At  first  such   governmental  restraints   in   many 

1— Pub.  Ut.  I 


2  PUBLIC    UTILITIES. 

instances  were  regarded  as  inconsistent  with  the  indi- 
vidual rights  guaranteed  by  our  constitutions.  But 
when  those  who  thought  that  their  constitutional  rights 
were  being  violated  through  the  increase  in  the  activity 
of  governmental  authority  appealed  to  the  courts  it 
was  decided  that  all  individuals  held  their  rights  sub- 
ject to  the  regulatory  power  of  the  municipality  and 
the  state.  The  courts  elaborated  what  they  called  the 
police  power.  Through  the  exercise  of  this  power  the 
community  within  the  provisions  of  the  constitution 
could  protect  itself  against  any  undue  emphasis  by  the 
individual  on  what  he  regarded  as  his  constitutional 
rights. 

More  recently,  however,  it  has  become  evident  that 
due  consideration  for  the  rights  of  the  community  and 
adequate  protection  of  the  public  welfare  can  not  be 
secured  through  mere  repressive  governmental  action 
but  that  the  only  way  in  which  the  greatest  present 
advantage  and  prospective  advancement  of  the  interests 
of  the  public  as  a  whole  can  be  secured  is  through  the 
positive  action  of  our  governmental  agencies  making 
greater  opportunities  more  uniformly  available  to  all 
the  people  to  improve  their  material  as  well  as  their 
moral  conditions.  As  the  problems  of  our  modern  civ- 
ilization are  most  acute  in  the  complex  conditions  which 
are  to  be  found  in  our  cities,  this  necessity  for  the  ex- 
tension of  the  sphere  of  governmental  activity  has  nat- 
urally assumed  the  form  of  a  demand  for  the  municipal 
ownership  and  operation  of  what  have  come  to  be 
known  as  municipal  public  utilities  or  their  adequate 
regulation  and  control. 

But  just  as  when  the  necessity  for  the  extension  of 
repressive  governmental  activity  became  apparent  it 
was  alleged  that  such  action  was  prohibited  by  our 
constitutional  provisions  protecting  private  rights,  so 
it  is  now  claimed  that  the  system  of  municipal  govern- 


INTRODUCTION.  3 

ment  provided  for  in  our  constitutions  and  in  our  law 
of  municipal  corporations  is  distinctly  governmental 
in  its  character  and  purpose,  and  that  the  city,  as  w^e 
knovv^  it,  may  not  enter  into  the  proprietary  field  of 
private  business.  In  this  connection  it  has  been  said 
that  the  city  in  our  system  is  organized  for  govern- 
ment and  not  for  profit,  and  that  its  activity  should  be 
confined  to  those  functions  w^hich  will  not  be  under- 
taken by  private  effort  because  their  pursuit  is  un- 
profitable; and  that  remunerative  enterprises  should 
be  left  to  private  capital  which  will  undertake  all  that 
is  necessary  and  execute  them  better  than  the  city  can 
be  expected  to  do. 

This  treatise  on  the  law  of  municipal  public  utili- 
ties attempts  to  ascertain  both  the  nature  of  the  mu- 
nicipal corporation  as  expressed  in  the  law  and  in  the 
construction  which  the  courts  have  given  to  the  pow- 
ers conferred  upon  the  municipality  by  the  state,  to 
discover  what  limitations  are  placed  on  municipal 
activity  by  our  constitutions,  as  construed  by  the 
courts;  and  how  far  the  judicial  construction  of  the 
law  with  regard  to  the  taxation  and  sale  of  municipal 
public  utilities  facilitates  or  impedes  the  cities  in  the 
discharge  of  these  new  duties  imposed  by  the  owner- 
ship, operation  or  proper  regulation  and  control  of  mu- 
nicipal public  utilities,  which  they  are  being  called  upon 
to  assume;  and  also  to  ascertain  what  are  the  most  efB- 
cient  methods  of  regulation  and  control  available  to  the 
state  or  municipality  over  the  operation  by  private 
capital  of  municipal  public  utilities. 

As  in  the  past  the  courts  developed  the  idea  of  a 
repressive  police  power  whose  exercise  was  found 
necessary  and  not  inconsistent  with  constitutional  pri- 
vate rights,  so  they  have  now  elaborated  the  doctrine 
of  the  implied  powers  of  municipal  corporations 
through  whose  application  the  cities  are  recognized  as 


t 


4  PUBLIC    UTILITIES. 

possessing  powers  which  at  one  time  were  denied 
them,  and  by  which  they  are  permitted  to  keep  abreast 
af  the  times  and  adjust  themselves  to  current  economic 
and  social  conditions. 

Municipal  ownership  and  operation  is  regarded  by 
the  courts  as  quite  consistent  with  our  constitutional 
system.  There  is  no  constitutional  objection  to  the 
grant  by  the  legislature  of  the  widest  powers  relative 
to  the  municipal  ownership  and  operation  of  municipal 
public  utilities.  And  it  is  submitted  that  the  only 
alternative  to  municipal  ownership  and  operation  of 
municipal  public  utilities  is  their  adequate  regulation 
and  control  by  the  municipality  or  by  a  state  or  munici- 
pal commission  acting  under  authority  conferred  upon 
it  by  the  state. 

Under  efficient  and  intelligent  regulation  and 
control  of  the  service  furnished  by  municipal  public 
utilities  and  of  the  rates  received  therefor,  the  neces- 
sity for  municipal  ownership  or  operation  as  a  means 
of  regulation  and  control,  which  in  most  cases  is  the 
controlling  motive,  it  is  believed  would  virtually  dis- 
appear, although  the  power  of  municipalities  to  own 
and  operate  their  municipal  public  utilities  should  al- 
ways remain  available. 

The  courts  in  their  consideration  of  the  powers 
possessed  by  municipal  corporations  have  generally 
adopted  the  principle  of  liberal  construction  where  its 
adoption  was  necessary  to  permit  these  corporations 
to  extend  their  sphere  of  activity  in  order  to  render  to 
their  inhabitants  the  services  so  necessary  in  modern 
urban  life,  and  with  this  purpose  in  view  they  have 
developed  the  idea  of  powers  implied  from  the  very 
nature  of  such  corporations  as  organs  for  social  serv- 
ice. With  the  idea  that  municipal  corporations,  which 
have  entered  into  what  is  often  called  the  field  of 
private  business,  are  really  discharging  a  service  which 


INTRODUCTION.  5 

is  just  as  public  in  character  as  the  preservation  of  the 
peace,  the  care  of  the  public  health  and  safety  or  the 
care  of  the  poor,  the  courts  have  consistently  refused 
to  make  any  distinction  between  the  property  used 
for  these  so-called  commercial  purposes  and  that  used 
for  governmental  purposes  by  denying  that  one  class 
of  property  is  to  be  taxed  any  more  than  the  other  or 
is  to  be  governed  by  any  more  liberal  law  as  to  its 
sale  or  alienation.  Of  course  the  courts  do  not  take 
the  view  that  it  is  not  subject  to  taxation  or  alienation 
but  merely  that  as  property  devoted  to  a  public  service 
it  is  untaxable  and  inalienable  in  the  absence  of  statu- 
tory provisions  to  that  effect. 

With  the  idea  that  municipal  public  utilities  are 
public  in  their  service  and  purpose  whether  in  public 
or  in  private  hands,  the  courts  have  assumed  that  the 
interests  of  the  public  must  first  be  considered  in  their 
decisions  as  to  the  powers  held  and  conferred  by  mu- 
nicipal corporations  in  their  grant  to  private  corpora- 
tions of  these  public  utility  franchises.  Believing 
whether  mistakenly  or  not  that  much  advantage  will 
accrue  to  the  public  from  competition  in  the  operation 
of  municipal  public  utilities,  the  courts  have  not  fav- 
ored exclusive  franchises  and  have  refused  to  recognize 
the  power  of  municipal  corporations  in  the  absence  of 
statutory  authority  to  grant  exclusive  franchises  or  to 
imply  that  a  franchise  was  exclusive  where  any  other 
reasonable  construction  was  possible  in  case  it  was 
found  that  the  municipality  granting  the  franchise  had 
the  legal  right  to  make  it  exclusive. 

Because  competition  alone  fails  to  secure  adequate 
service  at  reasonable  rates  in  an  industry  which  is  na- 
turally monopolistic  in  character,  all  the  courts  have 
agreed  that  the  legislature  has  the  power  of  controlling 
the  service  and  of  regulating  the  rates  that  may  be 
charged   by    these    municipal    public    utilities.      At    the 


6  PUBLIC    UTILITIES. 

same  time,  either  because  they  feared  too  drastic 
action  by  municipal  corporations  or  because  of  a  reluct- 
ance to  abandon  the  rule  of  strict  construction  of  mu- 
nicipal charters,  they  have  denied  that  the  municipal 
corporation  has  the  right,  in  the  absence  of  a  statutory 
provision  to  that  effect,  to  regulate  these  rates  except 
where  it  had  reserved  to  itself  such  power  to  regulate 
in  the  franchise  at  the  time  of  its  grant. 

In  laying  down  these  rules  the  courts  have  been 
strongly  influenced  by  the  feeling  that  the  controlling 
motive  of  the  private  companies  was  the  pecuniary 
advantage  of  their  stockholders,  and  that  unless 
checked  this  motive  might  result  to  the  public  disad- 
vantage. On  the  other  hand  they  have  frequently 
called  attention  to  the  fact  that  the  motive  actuating 
municipal  corporations  was  public  service  rather  than 
private  advantage.  They  have  therefore  recognized 
that  in  the  absence  of  legislative  authorization  a  pri- 
vate company  operating  a  public  utility  may  sell  its 
plant  to  a  municipal  corporation,  although  a  munici- 
pal corporation  may  not  reverse  the  process.  And 
while  the  courts  have  naturally  not  been  called  upon 
to  decide  as  to  the  expediency  or  the  policy  of  munici- 
pal ownership  and  operation  of  municipal  public  utili- 
ties, since  the  decision  of  this  matter  in  concrete  cases 
is  a  legislative  or  administrative  question  of  business 
policy  for  the  municipality  concerned  to  decide  for 
itself  within  the  limits  of  the  statutes  rather  than  a 
judicial  one,  the  courts  in  a  number  of  instances  have  ^ 

indicated  that  the  trend  of  modern  thought  is  favor-  | 

able  to  municipal  ownership  and  operation.  1 

The    efficient    and    impartial    enforcement    of    the  j 

rights  of  the  municipality  and  its  inhabitants  in  order  ) 

to  obtain  adequate  service  at  fair  uniform  rates  is  quite  | 

as  essential  as,  if  indeed  it  is  not  more  necessary  than,  f 

providing   the    necessary   power   and   authority   in   the 


INTRODUCTION.  7 

municipality  in  the  first  instance  to  insure  such  service 
for  itself  and  its  citizens.  The  strict  persistent  en- 
forcement of  the  law  and  the  franchise  or  contract 
rights  available  to  the  municipality  is  generally  found 
necessary  to  secure  satisfactory  service  at  a  fair  uni- 
form rate. 

The  public  utility  commission  is  the  latest  form  of 
securing  the  necessary  intelligent  regulation  and  con- 
trol and  is  attended  with  the  least  possible  expenditure 
of  money  and  time  necessary  to  secure  the  desired  re- 
sults. A  public  utility  commission  established  by  the 
state  or  a  municipal  commission  or  bureau  created  pur- 
suant to  authority  conferred  upon  the  municipality  by 
the  state  for  that  purpose  is  a  permanent  administra- 
tive body  of  trained  experts  whose  services  are  always 
available  for  the  purpose  of  investigating  and  adjusting 
the  conflicting  rights  and  liabilities  that  are  necessarily 
constantly  arising  between  the  opposing  parties  in- 
volved in  furnishing  and  using  any  municipal  public 
utility  service.  The  members  of  such  a  commission  are 
not  only  specially  trained  for  this  service,  but  they  give 
it  their  exclusive  attention,  and  the  information  secured 
in  connection  with  the  investigations  and  adjustments 
made  in  the  course  of  a  few  years  furnishes,  at  a  com- 
paratively nominal  expense,  the  necessary  technical 
data  in  detail  which,  when  properly  classified  by  the 
commission,  constitute  the  basis  for  the  investigation 
and  adjustment  of  any  question  arising  as  to  any  par- 
ticular municipal  public  utility. 

The  fact  that  a  franchise  is  not  self-enforcing  and 
that  statutory  provisions  for  the  regulation  of  munici- 
pal public  utility  service  are  not  self-executing  fur- 
nishes ample  justification  for  a  public  utility  commis- 
sion. Being  a  matter  of  business  administration  the 
commission  which  is  composed  of  trained  business 
experts   along   this   particular  line   not   only   furnishes 


8  PUBLIC    UTILITIES. 

the  best  and  most  efficient  method  for  regulating  the 
business  but  also,  by  separating  it  from  other  munici- 
pal affairs  and  political  considerations,  relieves  it  of  the 
greatest  practical  difficulty  which  now  generally  at- 
tends the  administration  of  such  business  matters  by 
the  ordinary  municipal  officer  who  is  selected  by  a  po- 
litical party,  and  because  of  the  manner  of  his  selection 
and  the  short  term  of  his  service  can  not  be  nor  be- 
come an  expert  on  the  subject. 

With  the  business  of  municipal  public  utihties 
placed  in  the  hands  of  such  a  non-partisan  permanent 
commission  of  capable  men  specially  trained  for  ren- 
dering such  service,  these  very  important  and  exten- 
sive business  interests,  in  which  every  inhabitant  of 
the  municipality  as  well  as  the  municipality  itself  is 
vitally  interested,  would  be  separated  from  political 
matters  and  party  politics  which  are  now  all  too  often 
controlled  by  and  in  the  interest  of  those  in  charge 
of  the  municipal  public  utilities.  Whether  other  mu- 
nicipal affairs  are  matters  of  business  rather  than 
politics,  there  can  be  no  question  but  that  all  matters 
of  municipal  public  utilities  are  business  questions  and 
not  political  ones  which  accordingly  can  only  be  prop- 
erly disposed  of  in  a  business  way  and  by  men  espe- 
cially informed  and  experienced  in  such  affairs  rather 
than  by  municipal  officers  selected  by  political  parties 
for  a  short  term  of  service.  There  is  no  more  justi- 
fication for  expecting  satisfactory  and  efficient  admin- 
istration of  municipal  public  utility  affairs  at  the  hands 
of  municipal  officers  who  are  thus  selected  at  such 
frequent  intervals  than  would  be  the  case  in  the  affairs 
of  any  large  business  concern.  Both  alike  require 
capable  experienced  men  specially  trained  and  per- 
manently in  charge  of  the  regulation  or  administration 
of  such  concerns. 

As   municipalities   show  greater   ability   to   conduct 


I 


INTRODUCTION.  9 

their  own  municipal  and  business  affairs  there  is  a 
general  tendency  to  permit  them  to  do  so.  This  is 
evidenced  by  recent  constitutional  provisions  in  a 
number  of  states  granting  what  is  commonly  known 
as^  "home  rule"  for  municipalities.  The  first  duty  of 
the  municipality  toward  properly  disposing  of  its 
municipal  affairs  so  far  at  least  as  they  are  concerned 
with  municipal  public  utilities  is  the  creation  of  a 
franchise  bureau  or  a  municipal  public  utility  com- 
mission for  the  purpose  of  securing  complete  and 
accurate  information  concerning  the  franchise  or  con- 
tract provisions  of  its  municipal  public  utilities  and  all 
other  information  in  regard  to  their  investment,  main- 
tenance and  operation;  and  whether  there  be  a  state 
public  utility  commission  or  not,  each  municipality  has 
problems  peculiar  to  itself  and  should  have  complete 
and  accurate  information  in  regard  to  all  its  munici- 
pal public  utilities  as  well  as  an  administrative  body 
composed  of  capable  experienced  men  able  to  cope 
with  those  in  charge  of  the  affairs  of  the  municipal 
public  utility  itself  in  the  interest  of  the  public. 

Such  a  bureau  or  commission  should  investigate 
and  advise  the  municipal  authorities  on  all  questions 
of  franchise  rights  and  attend  to  their  enforcement 
constantly  and  consistently  as  well  as  to  the  service 
rendered  by  the  company  and  determine  the  reason- 
ableness of  the  rate  received  by  it  for  the  service,  for 
it  is  evident  that,  in  a  business  of  such  magnitude  with 
as  many  details  of  administration  and  technical  ques- 
tions involved  as  are  common  to  the  affairs  of  munici- 
pal public  utilities,  the  municipality  and  its  inhabi- 
tants can  only  be  in  position  to  secure  and  know  that 
they  are  receiving  proper  service  at  a  fair  uniform 
rate  by  the  employment  of  such  men  as  are  capable 
of  investigating  such  questions  equally  with  the  of- 
ficers of  the  municipal  public  utility  itself. 


lO  PUBLIC    UTILITIES. 

While  the  municipal  commission,  bureau  or  other 
administrative  department  of  the  municipality  is  of 
great  value,  the  expense  of  maintaining  one  properly- 
equipped  and  sufficient  in  itself  would  be  prohibitive  to 
all  but  the  large  municipalities.  This  fact  makes  neces- 
sary state  public  utility  commissions.  Many  municipal 
public  utilities  are  becoming  interurban  in  their  scope 
and  are  no  longer  local  to  the  particular  municipality 
whose  jurisdiction  accordingly  is  not  sufficiently  com- 
prehensive to  provide  the  necessary  regulation  and 
control.  Where  several  municipalities  are  alike  inter- 
ested in  the  control  and  operation  of  the  same  munici- 
pal public  utility,  it  is  evident  that  the  control  which 
they  would  thus  exercise  independently  of  each  other, 
being  naturally  local  in  each  instance,  could  not  be 
uniform.  Each  municipality  is  necessarily  limited  to 
its  own  territory  so  that  the  only  method  by  which 
to  secure  adequate  regulation  is  through  a  state  public 
utility  commission. 

The  information  necessary  and  the  data  essential  to 
insure  a  comprehensive  regulation  of  the  service  and  a 
fair  uniform  rate  can  be  secured  to  the  best  advantage 
by  the  state  in  connection  with  a  public  utility  commis- 
sion of  trained  experts  on  the  subject.  They  in  turn 
can  serve  similar  departments  of  the  municipalities  of 
the  state  in  an  advisory  capacity,  and  each  supplement- 
ing the  other,  can  secure  the  best  results  at  the  least 
expense.  The  theory  of  the  regulation  of  municipal 
public  utilities  by  the  state  through  such  a  commission 
is  to  avoid  competition  which  is  now  generally  recog- 
nized as  a  needless  economic  waste  and  an  entirely  in- 
sufficient method  of  securing  the  necessary  regulation 
and  control.  Under  this  method  the  state  through  its 
commission  takes  the  place  of  competition  and  furnishes 
the  regulation  which  competition  can  not  give,  and  at 
the  same  time  avoids  the  expense  of  duplication  in  the 


INTRODUCTION.  II 

investment  and  operation  of  competing  municipal  pub- 
lic utilities. 

On  the  other  hand  the  municipal  public  utility, 
operating  under  what  the  public  utilities  law  of  Wis- 
consin— aptly  designates  the  "intermediate  permit," 
is  protected  against  competition  and  a  possible  loss 
of  its  plant  occurring  at  the  expiration  of  the  fran- 
chise. Under  this  law  the  public  utility  commission 
determines  in  the  first  instance  whether  public  con- 
venience and  necessity  demands  municipal  public  util- 
ity service  where  such  a  company  proposes  to  install 
its  plant  and  furnish  such  service,  and  only  after  a 
determination  of  this  question  in  the  affirmative  and 
the  granting  of  its  consent  by  the  commission  may  the 
municipal  public  utility  plant  be  installed;  thus  avoid- 
ing needless  competition  by  legalizing  a  monopoly. 
The  consideration,  however,  for  such  franchises  and 
exclusive  privileges  is  that  they  shall  be  constantly 
and  completely  under  the  regulation  and  control  of 
the  state  through  its  public  utility  commission. 

This  control  covers  the  question  of  the  capitaliza- 
tion of  the  municipal  public  utility  so  that  the  amount 
of  stock  and  bonds  issued  by  such  a  company  is  de- 
termined by  the  public  utility  commission  which  also 
supervises  the  construction  of  the  plant,  thus  insuring 
the  expenditure  on  the  plant  of  all  funds  received  from 
the  sale  of  such  stock  and  bonds  as  well  as  limiting 
such  expenditure  and  preventing  extravagance  or  un- 
necessary construction.  This  control  over  the  capital- 
ization and  issue  of  stocks  and  bonds  of  the  municipal 
public  utility  by  the  state  not  only  protects  the  con- 
sumer of  the  service  by  securing  a  fair  rate,  but  also 
the  investor  in  the  public  utility  securities.  It  insures 
on  the  one  hand  proper  service  at  a  reasonable  rate  as 
determined  by  the  actual  cost  and  on  the  other  a  fair 
return  on  the  investment  actually  put  into  the  business. 


12  PUBLIC     UTILITIES. 

By  such  regulation  capitalization  and  investment  coin- 
cide which  simpHfies  the  matter  of  rate  regulation  as 
well  as  that  of  making  investments  in  the  securities  of 
such  companies  and  preventing  fluctuation  in  their 
values. 

The  law  of  municipal  public  utilities,  which  it  is 
the  purpose  of  this  treatise  to  expound  fully  and 
impartially,  has  been  enunciated  and  developed  chiefly 
by  the  decisions  of  our  courts  of  record.  While  these 
decisions  are  very  numerous  and  exceedingly  practical 
they  are  comparatively  recent.  This  fact  together 
with  the  fact  that  the  decisions  are  frequently  con- 
flicting and  the  subject  rapidly  developing  constitutes 
at  once  the  reason  and  the  justification  for  making 
the  gist  of  the  decisions  the  basis  and  the  authority 
for  this  treatise.  This  method  of  treating  the  subject 
has  been  employed  to  make  the  work  more  authorita- 
tive and  of  greater  practical  value  to  every  one  inter- 
ested in  this  very  important  subject. 


CHAPTER  II. 

THE  TWO  CAPACITIES  OF  MUNICIPAL  COR- 
PORATIONS. 

Section. 

1.  Powers  of  municipal  corporations. 

2.  Classification  of  powers. 

3.  Public  and  governmental  powers. 

4.  No  liability  for  governmental  powers. 

5.  Limitation  of  governmental  powers. 

6.  Proprietary  business  powers. 

7.  Liability  of  municipality. 

8.  Powers  and  liability  determined  by  capacity. 

9.  Municipal  public  utilities  a  business  concern. 

§  I.  Powers  of  Municipal  Corporations. — Munici- 
pal corporations,  like  all  others,  are  creatures  of  statu- 
tory origin  and  possess  only  the  powers  granted  to 
them  by  the  legislature.  These  powers  consist  of  those 
granted  in  express  words;  those  necessarily  or  fairly 
implied  in  or  incident  to  the  powers  expressly  granted; 
and  those  essential  to  the  declared  objects  and  pur- 
poses of  the  corporation — not  simply  convenient,  but 
indispensable.^ 

§  2.  Classification  of  Powers. — The  powers  with 
which  municipal  corporations  are  endowed  by  the 
legislature  creating  them  are  divided  into  two  main 
classes  so  that  municipal  corporations  act  in  two  dis- 
tinct capacities.  The  one  is  governmental,  legislative 
or  public;  the  other  is  proprietary,  commercial  and  in 
this  sense  quasi  private.  In  the  former  capacity  the 
municipal  corporation  in  exercising  its  governmental 
or  public  power  acts  as  an  agent  of  the  state  which 

iNew  Decatur  v.  Berry,  90  Ala.  432,  7  So.  838,  24  Am.  St  827; 
Spaulding  v.  Lowell.  23  Pick.  (Mass.)  71;  Smith  v.  Newbern,  70  N. 
C.  14,  16  Am.  Rep.  766;  Dillon  Mun.  Corp.,  §  237  and  cases  cited. 

13 


§  3  PUBLIC    UTILITIES.  I4 

creates  it  in  preserving  the  public  peace,  administering 
justice  and  in  attending  to  the  public  health,  providing 
fire  protection  and  in  the  carrying  on  of  the  public 
educational  system  for  the  general  good  and  the 
public  welfare. 

§  3.  Public  and  governmental  pov^^ers. — Over  all 
these  public  and  governmental  powders  exercised  by  the 
municipal  corporation  in  its  capacity  as  an  agent  of 
the  state  the  authority  of  the  state  is  by  virtue  of  the 
very  nature  of  the  relation  essentially  supreme  and 
unHmited  in  the  absence  of  constitutional  limitations. 
The  officers  of  the  municipal  corporation  are  trustees 
for  the  public  whose  powers  are  wholly  delegated  to 
them  by  the  sovereign  and  strictly  limited  by  the 
statutes  granting  them  so  that  such  officers  can  not 
circumscribe  the  legislative  powers  of  their  successors 
by  making  contracts  for  the  discharge  of  a  purely 
public  governmental  duty.  Such  governmental  func- 
tions and  public  powers  must  be  left  free  and  un- 
trammeled  so  that  they  may  be  exercised  at  any  and 
all  times  for  the  benefit  and  to  the  best  advantage  of 
the  citizens  as  conditiong  change  and  emergencies 
arise.  A  municipality  can  not  abridge  its  legislative 
governmental  power  by  contract,  nor  is  it  liable  for 
the  negligence  of  its  officers  or  agents  in  the  perform- 
ance of  such  corporate  duties  or  for  their  failure  to 
exercise  such  corporate  powers.^ 

In  the  case  of  Penley  v.  Auburn,  85  Maine  278,  27 
Atl.    158,   21    L.    R.    A.   657,   the   court   held   invalid   a 

2  Penley  v.  Auburn,  85  Maine  278,  27  Atl.  158,  21  L.  R.  A.  657; 
Hamilton  v.  Shelby ville,  6  Ind.  App.  538,  33  N.  E.  1007;  Springfield 
Fire  &  Marine  Ins.  Co.  v.  Keeseville,  148  N.  Y.  46,  42  N.  E.  405, 
30  L.  R.  A.  660,  51  Am.  St.  667;  Horkan  v.  Moultrie,  136  Ga.  561, 
71  S.  E.  785;  People  v.  Chicago,  256  111.  558,  100  N.  E.  194;  United 
States  V.  Sault  Ste.  Marie,  137  Fed.  258;  Asbury  v.  Albemarle, 
(N.  C.)  78  S.  E.  146,  Board  of  Water  Commissioners,  In  re, 
(Conn.)   87  Atl.  870. 


15  CAPACITIES   OF    MUNICIPALITIES.  §  3 

covenant  of  the  city  to  open  a  certain  street  and  main- 
tain it  in  that  condition  permanently,  expressing  its 
decision  to  the  effect  that  such  a  covenant  was  void, 
being  beyond  the  powder  of  the  city  to  make,  by  saying 
"No  case  has  been  cited  that  holds  a  municipal  cor- 
poration liable  to  an  individual,  on  its  covenant  to  per- 
form a  municipal  duty  required  of  it  by  law." 

The  case  of  Hamilton  v.  Shelbyville,  6  Ind.  App. 
538,  33  N.  E.  1007,  in  holding  a  covenant  of  the  city 
to  provide  drainage  for  a  private  individual  void  ex- 
presses the  principle  as  follows:  "The  city  has  no 
power  to  make  a  contract  obligating  itself  to  furnish 
or  provide  drainage  for  plaintiff's  lands.  In  providing 
drainage  for  lands  within  or  adjoining  its  corporate 
limits,  it  exercises  governmental  functions.  When  it 
accomplishes  this  end,  its  powers  in  this  respect  cease. 
In  doing  that,  it  might  incidentally  drain  the  lands 
of  the  plaintiff,  but  it  could  not  contract  to  furnish 
drainage  for  plaintiff's  lands  in  the  future.  Such  con- 
tract is  beyond  the  scope  and  purpose  of  the  city's 
existence.  The  future  requirements  of  the  city  may 
demand  that  the  drain  be  abandoned  or  filled  up  and 
discontinued." 

In  the  case  of  Springfield  Fire  &  Marine  Ins.  Co. 
V.  Keeseville,  148  N.  Y.  46,  30  L.  R.  A.  660,  51  Am. 
St.  667,  42  N.  E.  405,  where  the  court  refused  to  hold 
the  defendant  city  liable  for  the  destruction  of  a  house 
by  fire  due  to  the  alleged  negligence  of  said  city  in 
operating  its  water-works  system  the  court  said: 
"When  we  find  that  the  power  conferred  has  relation 
to  public  purposes  and  is  for  the  public  good,  it  is  to 
be  classified  as  governmental  in  its  nature,  and  it  ap- 
pertains to  the  corporation  in  its  political  character. 
But  when  it  relates  to  the  accomplishment  of  private 
corporate  purposes,  in  which  the  public  is  only  in- 
directly concerned,  it  is  private  in  its  nature  and  the 


§  4  PUBLIC    UTILITIES.  l6 

municipal  corporation,  in  respect  to  its  exercise,  is 
regarded  as  a  legal  individual.  In  the  former  case, 
the  corporation  is  exempt  from  all  liability,  whether 
for  nonuser  or  misuser;  while  in  the  latter  case,  it 
may  be  held  to  that  degree  of  responsibility  which 
would  attach  to  an  ordinary  private   corporation." 

§  4.  No  liability  for  governmental  powers. — The 
manner  as  well  as  the  extent  to  which  it  may  be 
proper  for  the  municipal  corporation  to  exercise  these 
public  governmental  powers,  within  the  limitations 
fixed  by  the  law  creating  them,  are  necessarily  in- 
trusted to  the  will  and  judgment  of  the  municipal 
authorities  to  whom  they  are  delegated,  and  such 
authorities  are  permitted  and  expected  to  exercise 
their  discretion  in  such  matters.  Because  these  powers 
are  public  and  governmental  in  their  nature  and  the 
duties  imposed  by  them  are  executed  by  the  authori- 
ties in  the  exercise  of  their  discretion,  the  municipal 
corporation  is  not  liable  for  a  failure  to  perform  such 
duties  nor  for  the  erroneous  exercise  of  such  powers. 
A  municipal  corporation,  for  example,  can  not  make 
a  contract  with  the  owner  of  a  building  to  put  out  a 
fire  therein  and  then  require  him  to  pay  for  such 
service,  nor  can  it  expose  itself  to  liability  if  it  fails 
to  put  out  the  fire  with  regard  to  which  it  has  at- 
tempted to  make  the  contract.^  | 

The  case  of  the  Brick  Presbyterian  Church  v.  New 
York,   5    Cow.    (N.   Y.)    538,   illustrates   this   principle  t 

and  states  the  reason  for  this  rule  of  law.     The  action  ) 

in  the  case  was  for  a  breach  of  covenant  for  the  quiet  f 

sBrinkmeyer  v.  Evansville,  29  Ind.  187;  Black  v.  Columbia,  \ 
19  S.  Car.  412,  45  Am.  Rep.  785;  Wheeler  v.  Cincinnati,  19  Ohio  ' 
St.  19,  2  Am.  Rep.  368;  The  Maggie  P,  25  Fed.  202;  Brick  Presby-  ' 
terian  Church  v.  New  York,  5  Cow.  (N.  Y.)  538;  Crowder  v.  Sulli- 
van, 128  Ind.  486,  28  N.  E.  94,  13  L.  R.  A.  647;  Snouffer  v.  Cedar  ' 
Rapids,  &c.   R.  Co.,  118  Iowa  287,  92  N.  W.  79. 


17  CAPACITIES    OF    MUNICIPALITIES.  §  4 

enjoyment  of  the  premises  which  the  defendant  city- 
had  leased  to  the  plaintiff  for  church  and  cemetery- 
purposes.  After  making  the  lease  and  pursuant  to  a 
statute  the  city  by  ordinance  prohibited  the  further 
use  of  the  premises  for  a  cemetery.  In  refusing  relief 
to  the  plaintiff  for  the  reason  that  the  city  had  no 
power  to  limit  its  legislative  discretion  by  covenant 
the  court  said :  "Sixty  years  ago,  when  the  lease  was 
made,  the  .premises  were  beyond  the  inhabitated  parts 
of  the  city.  They  were  a  common,  and  bounded  on 
one  side  by  a  vineyard.  Now  they  are  in  the  very 
heart  of  the  city.  When  the  defendant  covenanted 
that  the  lessees  might  enjoy  the  premises  for  the  pur- 
poses of  burying  their  dead,  it  never  entered  into  the 
contemplation  of  either  party,  that  the  health  of  the 
city  might  require  the  suspension  or  abolition  of  that 
right." 

In  the  case  of  Crowder  v.  Sullivan,  128  Ind.  486, 
28  N.  E.  94,  13  L.  R.  A.  647,  the  court  states  this 
principle  of  the  inability  of  the  municipal  corporation 
to  contract  with  reference  to  its  public  or  govern- 
mental duty  by  saying:  "A  private  corporation  that 
obtains  a  license  to  use  the  streets  of  a  municipality 
takes  it  subject  to  the  power  of  a  municipality  to  enact 
a  general  ordinance;  for  a  governmental  power  such 
as  that  exercised  in  enacting  police  regulations  can 
not  be  surrendered  or  bartered  away  even  by  express 
contract."  Again  in  the  case  of  Snouffer  v.  Cedar 
Rapids,  &c.  R.  Co.,  118  Iowa  287,  92  N.  W.  79,  the 
court  expresses  this  well-established  legal  principle 
to  the  effect  that,  "in  the  absence  of  statutory  author- 
ity, a  contract  or  agreement,  whether  in  the  form  of 
an  ordinance  or  otherwise,  which  directly  or  indirectly 
surrenders  or  materially  restricts  the  exercise  of  a 
governmental  or  legislative  function  or  power,  may  at 

2— Pub.  Ut. 


♦ 


§  5  PUBLIC    UTILITIES.  l8 

any   time   be   terminated   or   annulled   by    the    munici-  J 

pality."  -* 

§  5.     Limitation     of     governmental     powers. — The 

powers  of  the  municipal  corporation  in  its  capacity  as 
an  agent  of  the  state  are  well  defined  and  strictly 
limited  by  the  statutory  provisions  granting  them. 
There  is  little  or  no  opportunity  here  for  invoking  the 
doctrine  of  liberal  construction  nor  for  extending  its 
sphere  of  activity  by  the  doctrine  of  implied  powers. 
It  is  the  duties  of  the  sovereign  that  are  to  be  per- 
formed in  the  manner  provided  by  law  and  its  interests 
alone  are  to  be  considered. 

On  the  other  hand,  the  municipal  corporation  in 
its  private  proprietary  and  essentially  business  or  com- 
mercial aspect  acts  as  a  property  owner  and  the  pro- 
prietor of  a  business  enterprise  for  the  private  advan- 
tage of  the  city  and  its  citizens  as  a  distinct  legal 
personality  and  may  exercise  its  business  powers  very 
much  in  the  same  way  as  a  private  individual  or  cor- 
poration. In  the  erection  and  operation  of  gas  works, 
electric  light  plants,  water-works  and  the  like,  as  well 
as  in  contracting  for  such  service  and  in  attending  to 
matters  of  local  interest  merely  for  the  special  benefit 
and  advantage  of  the  city  and  its  citizens,  a  municipal 
corporation  acts  as  a  business  concern.* 

This  principle  of  the  liability  of  the  municipal  cor- 
poration on  its  contracts  made  pursuant  to  the  power 
and  authority  conferred  upon  it  by  the  state  is  well 
illustrated  and  accurately  stated  in  the  case  of  Illinois 

4  Henderson  v.  Young,  119  Ky.  224,  26  Ky.  L.  1152,  83  S.  W. 
583;  Port  Jervis  Water  Co.  v.  Port  Jervis,  151  N.  Y.  Ill,  45  N.  E. 
388;  Indianapolis  v.  Indianapolis  Gas  Co.,  66  Ind.  396;  Blood  v. 
Manchester  Electric  Light  Co.,  68  N.  H.  340,  39  Atl.  335;  Palestine 
V.  Siler,  225  111.  630,  80  N.  E.  345;  Denver  v.  Davis,  37  Colo.  370, 
86  Pac.  1027,  6  L.  R.  A.  (N.  S.)  1013;  Keefe  v.  People,  37  Colo. 
317,  87  Pac.  791;  Davis  v.  Rockport  (Mass.),  100  N.  E.  612. 

f 

i 


19  CAPACITIES    OF    MUNICIPALITIES.  §  5 

Trust  and  Sav.  Bank  v.  Arkansas  City,  76  Fed.  271,  34 
L.  R.  A.  518,  decided  in  1896.  In  holding  the  defend- 
ant city  hable  for  the  payment  of  rentals  for  water 
service  furnished  by  a  private  corporation,  and  ac- 
cepted and  used  by  the  city  for  many  years  in  accord- 
ance w^ith  a  contract  formally  executed  by  the  parties, 
the  court  expressed  the  rule  of  liability  in  the  follow- 
ing pertinent  words:  "A  city  has  two  classes  of 
powers;  the  one  legislative,  public,  governmental,  in 
the  exercise  of  which  it  is  a  sovereignty  and  governs 
its  people;  the  other,  proprietary,  quasi  private,  con- 
ferred upon  it,  not  for  the  purpose  of  governing  its 
people,  but  for  the  private  advantage  of  the  inhabi- 
tants of  the  city  and  of  the  city  itself  as  a  legal  per- 
sonality. In  the  exercise  of  the  powers  of  the  former 
class  it  is  governed  by  the  rule  here  invoked.  In  their 
exercise  it  is  ruling  its  people  and  is  bound  to  transmit 
its  powers  of  government  to  its  successive  sets  of 
of^cers  unimpaired.  But  in  the  exercise  of  the  powers 
of  the  latter  class  it  is  controlled  by  no  such  rule, 
because  it  is  acting  and  contracting  for  the  private 
benefit  of  itself  and  its  inhabitants,  and  it  may  exercise 
the  business  powers  conferred  upon  it  in  the  same 
way,  and  in  their  exercise  it  is  to  be  governed  by  the 
same  rules  that  govern  a  private  individual  or  cor- 
poration. Dillon  Mun.  Corp.,  §  109,  and  cases  cited  in 
the  note;  Safety  Insulated  Wire  &  Cable  Co.  v.  Balti- 
more, 66  Fed.  140;  San  Francisco  Gas  Co.  v.  San 
Francisco.  9  Cal.  453;  Commonwealth  v.  Philadelphia, 
132  Pa.  St.  288,  19  Atl.  136;  New  Orleans  Gaslight 
Co.  V.  New  Orleans,  42  La.  Ann.  188,  7  So.  559; 
Tacoma  Hotel  Co.  v.  Tacoma  Light  &  Water  Co.,  3 
Wash.  St.  316,  28  Pac.  516;  Wagner  v.  Rock  Island, 
146  111.  139,  34  N.  E.  545,  21  L.  R.  A.  519;  Vincennes 
V.  Citizens'  Gaslight  Co..  132  Ind.  114,  31  N.  E.  573; 
Indianapolis  v.   Indianapolis  Gaslight  &  Coke  Co.,  66 


§  6  PUBLIC    UTILITIES.  20 

Ind.  396;  Read  v.  Atlantic  City,  49  N.  J.  L.  558,  9 
Atl.  759.  In  contracting  for  water-works  to  supply 
itself  and  its  inhabitants  with  water,  the  city  is  not 
exercising  its  governmental  or  legislative  powers,  but 
its  business  or  proprietary  powers.  The  purpose  of 
such  a  contract  is  not  to  govern  its  inhabitants,  but 
to  obtain  a  private  benefit  for  the  city  itself  and  its 
denizens." 

§  6.  Proprietary  business  powers. — The  munici- 
pal corporation  in  contracting  for  the  construction  or 
purchase  of  plants  providing  such  public  utilities  as 
gas,  water  or  electric  light,  while  acting  within  the 
scope  of  their  authority  as  conferred  upon  them  by 
statutory  enactment,  either  expressly  or  by  necessary 
implication,  is  not  exercising  its  governmental  func- 
tions but  is  acting  in  its  private  business  capacity  for 
its  own  special  benefit  and  the  advantage  of  its  citizens 
and  is  liable  in  the  same  way  and  to  the  same  extent 
as  a  private  individual  or  corporation.  The  case  of 
Omaha  Water  Co.  v.  Omaha,  147  Fed.  i,  decided  in 
1906,  furnishes  an  excellent  statement  and  a  pertinent 
application  of  this  principle.  In  holding  the  defendant 
city  liable  under  its  contract  to  purchase  the  property 
of  the  water-works  company  made  pursuant  to  proper 
legislative  authority  and  by  the  exercise  of  the  option 
to  purchase  provided  for  in  the  franchise  granted  by 
the  city  to  the  plaintiff,  the  court  says:  "A  city  has 
two  classes  of  powers,  the  one  legislative  or  govern- 
mental, by  virtue  of  which  it  controls  its  people  as  their 
sovereign,  the  other  proprietary  or  business,  by  means 
of  which  it  acts  and  contracts  for  the  private  advan- 
tage of  the  inhabitants  of  the  city  and  of  the  city  itself. 
In  the  exercise  of  powers  which  are  strictly  govern- 
mental or  legislative  the  of^cers  of  a  city  are  trustees 
for  the  public  and  they  may  make  no  grant  or  contract 


21  CAPACITIES   OF    MUNICIPALITIES.  §  7 

which  will  bind  the  municipality  beyond  the  terms  of 
their  office  because  they  may  not  lawfully  circum- 
scribe the  legislative  powers  of  their  successors.  But 
in  the  exercise  of  the  business  powers  of  a  city,  the 
municipality  and  its  officers  are  controlled  by  no  such 
rule  and  they  may  lawfully  exercise  these  powers  in 
the  same  way  and  in  their  exercise  the  city  will  be 
governed  by  the  same  rules  which  control  a  private  in- 
dividual or  a  business  corporation  under  like  circum- 
stances. In  contracting  for  the  construction  or  pur- 
chase of  water-works  to  supply  itself  and  its  inhabi- 
tants with  water  a  city  is  not  exercising  its  govern- 
mental or  legislative,  but  is  using  its  business  or 
proprietary  powers.  The  purpose  of  such  a  contract 
is  not  to  govern  its  inhabitants,  but  to  obtain  a  private 
benefit  for  the  city  and  for  its  denizens.  Illinois  Trust 
&  Sav.  Bank  v.  Arkansas  City,  22  C.  C.  A.  171,  182, 
and  cases  there  cited,  76  Fed.  271,  292,  34  L.  R.  A. 
518." 

§  7.  Liability  of  municipality. — The  distinction  be- 
tween the  two  capacities  in  which  municipal  corpora- 
tions act — the  one  in  which,  as  an  arm  of  sovereignty 
or  an  agent  of  the  state,  it  is  charged  with  legislative 
and  governmental  powers;  and  the  other  in  which  it 
is  a  property  holder  conducting  a  business  enterprise 
for  the  private  advantage  of  the  city  and  its  citizens — 
is  well  stated  in  the  case  of  Sammons  v.  Kearney 
Power  &c.  Co..  jy  Nebr.  580,  no  N.  W.  308,  decided 
in  1906,  where  the  court  said:  "A  municipal  corpora- 
tion is  an  instrumentality  of  the  state  for  the  better 
administration  of  government  in  matters  of  local  con- 
cern. United  States  v.  New  Orleans,  98  U.  S.  381. 
The  main  purpose  of  its  creation  is  the  exercise  of 
certain  governmental  functions  within  a  defined  area. 
While  it  has  the  power  to  make  contracts  and  transact 


I 


§  7  PUBLIC    UTILITIES.  22 

Other  business  not  strictly  governmental  in  character, 
such  powers  are  incidental  or  auxiliary  to  its  main 
purpose.  ...  In  the  case  at  bar  we  are  dealing 
with  an  irrigation  company — a  quasi  public  corpora- 
tion. It  is  also  a  governmental  agency,  but  its  main 
purpose  is  the  administration  of  a  public  utility.  To 
the  extent  of  its  capacity  it  is  bound  to  furnish  water 
from  its  canal  to  persons  desiring  to  use  it  on  equal 
terms  and  without  discrimination.  In  this  respect  it 
stands  on  the  same  footing  as  a  railroad  company." 

That  the  city  of  New  York  in  the  erection  and 
operation  of  its  rapid  transit  subway  system  acts  in 
the  capacity  of  a  private  business  concern  rather  than 
as  a  governmental  agency  and  is  accordingly  liable  in 
damages  to  abutting  property  owners  is  decided  in  the 
case  of  In  re  Board  of  Rapid  Transit  R.  Comrs.,  197 
N.  Y.  81,  90  N.  E.  456,  36  L.  R.  A.  (N.  S.)  647,  18 
Ann.  Cas.  366,  where  the  court  said:  "In  other  words, 
the  subway  is  a  business  enterprise  of  the  city,  through 
which  money  may  be  made  or  lost,  the  same  as  if  it 
were  owned  by  an  ordinary  railroad  corporation.  It 
was  built  by  and  belongs  to  the  city  as  a  proprietor, 
not  as  a  sovereign.  .  .  .  Such  a  use  was  not  within 
the  contemplation  of  the  original  owner  of  the  land 
when  he  parted  with  the  title  thereto  for  a  street,  or 
gave  a  perpetual  right  of  way  over  the  same  for  the 
purpose  of  a  street." 

This  principle  holding  a  municipal  corporation 
liable  as  a  private  individual  or  business  concern  under 
its  contract  in  the  purchase  and  operation  of  gas  works 
for  the  debts  contracted  in  that  connection  was  clearly 
established  by  the  early  case,  which  has  long  been  a 
leading  one  on  the  subject,  of  Wheeler  v.  Philadelphia, 
y'j  Pa.  St.  338,  decided  in  1875,  where  the  court  used 
the  following  language :  "The  most  that  can  be  urged 
is,  that  the  city  is  acting  in  a  double  capacity;  in  the 


23  CAPACITIES   OF    MUNICIPALITIES.  §  8 

one,  exercising  rights  of  sovereignty,  in  the  other, 
performing  the  functions  of  a  private  corporation  in 
the  manufacture  and  sale  of  gas.  .  .  .  While  it 
is  no  part  of  the  ordinary  and  necessary  duties  of  a 
municipal  corporation  to  supply  its  citizens  v^ith  gas 
and  v^ater,  it  is  nevertheless  true  that  it  may  lav^fully 
do  so  .  .  .  Aside  from  the  trustees,  and  they 
amount  to  nothing  in  our  v\qw  of  the  case,  the  gas 
works  may  be  considered  as  property  belonging  to  the 
city,  and  operated,  not  for  the  purpose  of  speculation, 
but  to  promote  the  comfort  of  the  whole  body  of  the 
people.  As  their  original  acquisition  and  subsequent 
use  were  lawful,  debts  contracted  therefor  must  be 
paid  by  the  city." 

§  8.     Powers  and  liability  determined  by  capacity. 

— This  distinction  of  the  two  capacities  of  municipal 
corporations  must  necessarily  be  made  and  kept  in 
mind  not  only  in  defining  and  fixing  the  nature  and 
extent  of  the  power  of  the  municipal  corporation  but 
also  in  determining  its  liability,  whether  for  the  neg- 
ligence of  its  officers  or  duly  authorized  agents  acting 
as  such  or  with  reference  to  its  contracts  duly  executed 
within  the  scope  of  its  authority.  In  its  private  or 
business  capacity  since  the  powers  conferred  are  for 
the  special  benefit  and  advantage  of  the  municipal 
corporation  as  such  and  which  are  only  incidentally 
concerned  with  the  general  government  of  the  state, 
the  municipal  corporation  is  generally  regarded  as 
having  the  same  powers  and  being  subject  to  the  same 
liabilities  as  in  the  case  of  a  private  corporation  or 
individual. 

§  g.  Municipal  public  utilities  a  business  concern. 
— Under  this  distinction  it  follows  that  the  municipal 
corporation  in  the  construction  and  operation  of  its 
own   water-works   has   the   same   powers   which   a   pri- 


§  8  PUBLIC    UTILITIES.  24 

vate  corporation  would  have  and  enjoy  in  the  same 
connection  on  the  theory  that  it  is  acting  in  a  private 
business  capacity  rather  than  in  the  exercise  of  its  pub- 
lic governmental  functions,  v^hich  is  well  illustrated 
by  the  case  of  Wagner  v.  Rock  Island,  146  111.  139,  34 
N.  E.  545,  21  L.  R.  A.  519,  decided  in  1893,  where  the 
court  observed:  ''The  business,  being  one  which  is 
impressed  with  a  public  use,  may,  where  proper  legis- 
lative authority  is  given,  be  carried  on  directly  by  the 
municipal  corporation,  or  it  may  be  carried  on  by  a 
private  corporation  acting  under  a  proper  franchise 
granted  to  it  for  that  purpose.  But,  when  a  municipal 
corporation  undertakes  to  construct  and  operate  water- 
works, it  does  so  in  the  exercise  of  its  private,  and  not 
of  its  governmental,  functions.  ...  In  separating 
the  two  powers — public  and  private — regard  must  be 
had  to  the  object  of  the  legislature  in  conferring  them. 
If  granted  for  public  purposes  exclusively,  they  belong 
to  the  corporate  body  in  its  public,  political,  or  munic- 
ipal character;  but  if  the  grant  was  for  purposes  of 
private  advantages  and  emolument,  though  the  public 
may  derive  a  common  benefit  therefrom,  the  corpora- 
tion, quo  ad  hoc,  is  to  be  regarded  as  a  private 
company  ...  Its  power  to  build  and  maintain 
water-works,  and  furnish  water  to  its  inhabitants  for 
a  consideration,  is  derived  from,  and  is  governed 
solely  by,  the  state ;  and  even  though  the  intention 
of  the  city  and  its  officers  may  have  been  to  furnish 
water  to  the  people  of  the  city  at  the  mere  cost  of 
maintaining  and  operating  the  works,  and  to  charge 
no  rates  that  would  result  in  accumulating  a  surplus 
revenue,  the  city  is  not  bound  to  persist  in  that  policy, 
but  is  at  liberty,  at  any  time,  to  abandon  it,  and  im- 
pose reasonable  rates  and  charges,  although  by  so 
doing  a  revenue  may  be  realized." 

To  the  effect  that  the  municipal  corporation,  while 


25  CAPACITIES   OF    MUNICIPALITIES.  §  8 

acting  in  the  discharge  of  its  private  business  func- 
tions, is  liable  for  the  negligence  of  its  officers  to  the 
same  extent  and  for  the  same  reason  that  determines 
the  liability  of  a  private  concern  is  illustrated  by  the 
case  of  Denver  v.  Davis,  37  Colo.  370,  86  Pac.  1027, 
6  L.  R.  A.  (N.  S.)  1013,  decided  in  1906,  where  the 
court  says:  "In  the  discharge  of  its  functions  a 
municipality  is  called  upon  to  perform  duties  of  two 
classes,  the  one  political  and  governmental  in  its  char- 
acter, and  the  other  private  and  corporate.  .  .  . 
The  rule  which  determines  the  liability  or  non-liability 
of  a  municipality  in  cases  of  this  nature  is  the  char- 
acter of  the  duty  performed,  rather  than  the  depart- 
ment, officer,  or  agent  of  the  corporation  by  whom 
the  duty  is  performed.  .  .  .  Nevertheless,  it  does 
not  follow  that  the  municipality  is  relieved  from  liabil- 
ity for  the  negligence  or  carelessness  of  such  officer, 
in  the  performance  of  duties  imposed  upon  him  by 
the  municipality  which  are  not  of  a  public  govern- 
mental character.  .  .  .  The  overwhelming  weight 
of  authority  is  to  the  effect  that  the  superintendence 
and  care  of  the  streets  and  alleys  of  a  city,  and  all 
that  directly  pertains  thereto,  are  peculiarly  in  the 
class  of  municipal  duties,  for  the  negligence  of  which 
the  city,  in  its  corporate  character,  is  liable.  .  .  . 
The  record  before  us  warrants  the  conclusion  that  in 
this  case  the  city  was  acting  in  its  private  and  cor- 
porate capacity,  through  its  health  commissioner,  for 
the  convenience  and  benefit  of  its  inhabitants,  and  not 
as  an  agent  of  the  state." 

This  principle  is  expressed  by  the  court  in  the  case 
of  Palestine  v.  Siler,  225  111.  630,  80  N.  E.  345,  decided 
in  1907,  as  follows:  "We  have  accordingly  held  that 
where  a  municipality  acts  in  the  dual  capacity  of  fur- 
nishing water,  gas  or  other  commodity,  both  for  pub- 
lic and  private  use.   under  authority  of  law,  it  stands 


§  8  PUBLIC    UTILITIES.  26 

Upon  the  same  footing  as  would  a  private  corporation 
or  individual  and  is  alike  liable  for  its  neglect  or 
wrongful  acts." 

Having  in  mind  then  this  distinction  of  the  two 
capacities  in  which  a  municipal  corporation  may  act 
— the  one  governmental  and  public  in  which  as  an 
arm  of  sovereignty  or  an  agent  of  the  state  it  is 
charged  with  legislative  and  governmental  powers, 
and  the  other  in  which  it  is  a  property  holder  and  a 
business  proprietor  conducting  enterprises  or  con- 
tracting for  their  service  from  another  for  the  private 
advantage  of  the  city  and  its  citizens — it  is  apparent 
that  this  treatise  on  municipal  public  utilities  is  pri- 
marily concerned  with  the  municipal  corporation  act- 
ing in  the  latter  capacity  as  a  business  concern. 


CHAPTER  III. 

CONSTRUCTION   OF   MUNICIPAL   CHARTERS. 

Section. 

10.  Reasonable  construction. 

11.  Power  and  discretion  limited  only  by  fraud  or  abuse. 

12.  Power  by  implication. 

13.  Liberal  construction. 

14.  Limitations  of  fraud  and  ultra  vires. 

15.  Power  to  dispose  of  surplus  capacity. 

§  10.  Reasonable  construction. — In  construing  mu- 
nicipal charters  only  such  strictness  is  observed  as 
gives  effect  to  every  power  clearly  intended  to  be 
conferred  on  the  municipal  corporation  and  every 
power  necessarily  implied  in  order  to  permit  of  the 
complete  exercise  of  the  powers  granted.  While  the 
sphere  of  their  activity  is  necessarily  confined  to  the 
limits  prescribed  by  the  law  creating  them,  within 
these  limits  their  action  is  favored  by  the  courts, 
and  powers  intended  to  be  conferred  will  not  be  de- 
feated or  impaired  by  a  strict  construction  of  the  char- 
ter of  the  municipal  corporation  to  which  such  powers 
are  granted.^ 

§  II.  Power  and  discretion  limited  only  by  fraud 
or  abuse. — The  rule  of  law  is  well  established  that  the 
discretion  of  municipal  corporations,  within  the  sphere 
of  their  powers  and  particularly  their  private  powers, 
is  absolute  and  not  subject  to  judicial  control,  except 
in  cases  where  fraud  is  found  or  where  the  power  or 
discretion  is  being  grossly  abused  to  the  oppression  of 

1  Smith  V.  Madison,  7  Ind.  86;   Kyle  v.  Malin,  S  Ind.  34. 
27 


§  II  PUBLIC    UTILITIES.  28 

the  citizen.  In  its  private  commercial  capacity  while 
acting  primarily  as  a  business  concern,  the  powers 
conferred  on  a  municipal  corporation  are  for  its  own 
special  benefit  and  advantage.  The  interest  of  the 
state  is  secondary  and  incidental,  for  the  main  purpose 
is  to  benefit  the  particular  locality  incorporated  by 
increasing  the  opportunities  and  extending  the  advan- 
tages of  its  citizens.  Recognizing  this  to  be  the  princi- 
pal object  in  the  creation  of  such  corporations  and  the 
sole  purpose  of  endowing  them  with  such  commercial 
and  proprietary  powers  as  permit  them  and  their 
citizens  to  enjoy  the  benefits  of  municipal  public  utili- 
ties, the  courts  permit  and  favor  the  exercise  of  the 
fullest  discretion  in  the  enjoyment  and  administration 
of  such  powers  which  are  consistent  with  the  general 
object  of  their  grant  and  the  best  interests  of  all  par- 
ties concerned  who  are  intended  to  be  benefited  by 
such  advantages. 

The  discretion  of  municipal  corporations  in  the 
exercise  of  their  powers  is  as  wide  as  that  enjoyed  by 
the  general  government  and  is  to  be  exercised  in 
accordance  with  the  judgment  of  the  authorities  in 
charge  of  the  municipal  corporation  as  to  the  neces- 
sity or  expediency  of  each  particular  subject  when  it 
arises.  The  legislature  is  one  of  the  co-ordinate 
branches  of  our  state  government  and  within  its 
sphere  is  supreme  and  so  is  the  municipal  corporation 
within  its  prescribed  limits,  whether  in  the  sphere  of 
legislation  or  in  the  exercise  of  discretion  with  ref- 
erence to  its  proprietary  interests.  The  judiciary  has 
little  more  right  or  power  to  interfere  with  the  acts 
of  one  than  of  the  other.  In  all  cases  where  the 
municipal  corporation  or  its  authorized  agents  or 
officers  act  within  their  powers  or  exercise  discretion 
granted  them  expressly  or  by  necessary  implication 
in  order  to  give  effect  to  powers   expressly  granted, 


29  CONSTRUCTION    OF    CHARTERS.  §  II 

the  courts  will  not  interfere  unless  fraud  is  found  or 
the  power  or  discretion  vested  in  them  is  being  grossly- 
abused  by  their  action,^ 

2  ALABAMA. — Montgomery  Gaslight  Co.  v.  Montgomery,  87  Ala. 
245,  6  So.  113,  4  L.  R.  A.  616. 

ARKANSAS.— Lackey  v.  Fayettevllle  Water  Co.,  80  Ark.  108, 
96  S.  W.  622;  Southwestern  Tel.  &  T.  Co.  v.  Wayne,  86  Ark.  548, 
111  S.  W.  987. 

COLORADO.— Thomas  v.  Grand  Junction,  13  Colo.  App.  80,  56 
Pac.  665. 

CONNECTICUT.— Bridgeport  v.  Housatonuc  R.  Co.,  15  Conn.  475. 

FEDERAL.— Ft.  Scott  v.  Eads  Brokerage  Co.,  117  Fed.  51. 

ILLINOIS.— Warren  v.  Chicago,  118  111.  329,  11  N.  E.  218. 

INDIANA.— Baumgartner  v.  Hasty,  100  Ind.  575,  50  Am.  R.  830; 
Indianapolis  v.  Indianapolis  Gaslight,  &c.,  Co.,  66  Ind.  396;  First 
Nat.  Bank  v.  Sarlls,  129  Ind.  201,  28  N.  E.  434,  13  L.  R.  A.  481; 
Pittsburgh,  etc.  Ry.  v.  Crown  Point,  146  Ind.  421,  45  N.  E.  587,  35 
L.  R.  A.  684;  Rockebrandt  v.  Madison,  9  Ind.  App.  227,  36  N.  E.  444; 
Valparaiso  v.  Gardner,  97  Ind.  1,  49  Am.  Rep.  416;  Vincennes  v. 
Gaslight  Co.,  132  Ind.  114,  31  N.  E.  573. 

IOWA.— Des  Moines  Gas  Co.  v.  Des  Moines,  44  Iowa  505,  24  Am. 
Rep.  756. 

KANSAS.— Columbus  Water  Co.  v.  Columbus,  48  Kans.  99,  28 
Pac.  1097,  15  L.  R.  A.  354;  State  ex  rel.  Means  v.  Hiawatha,  53  Kans. 
477,  36  Pac.  1119. 

KENTUCKY.— Henderson  v.  Young,  119  Ky.  224,  26  Ky.  L.  1152, 
83  S.  W.  583. 

LOUISIANA.— Conrey  v.  Waterworks  Co.,  41  La.  Ann.  910. 

MASSACHUSETTS.— Spaulding  v.  Lowell,  23  Pick.  (Mass.)  71. 

MICHIGAN.— Torrent  v.  Muskegon,  47  Mich.  115,  10  N.  W.  132, 
41  Am.  Rep.  715. 

MINNESOTA.— Janeway  v.  Duluth,  65  Minn.  292,  68  N.  W.  2l. 

MISSOURI.— Fruin-Bambrick  Const.  Co.  v.  St.  Louis  Shovel  Co., 
211  Mo.  524,  111  S.  W.  86. 

NEW  JERSEY.— Atlantic  City  Waterworks  Co.  v.  Atlantic  City, 
48  N.  J.  L.  378,  6  Atl.  24. 

NEW  YORK.— Admiral  Realty  Co.  v.  New  York,  206  N.  Y.  110, 
99  N.  E.  241;  Gamble  v.  Watkins,  7  Hun  (N.  Y.)  448;  Sun  Printing 
&  Publishing  Assn.  v.  New  York,  8  App.  Div.  (N.  Y.)  230,  152  N.  Y. 
257,  46  N.  E.  499,  37  L.  R.  A.  788. 

NORTH  CAROLINA.— Asbury  v.  Albemarle  (N.  C),  7S  S.  E.  146. 

OREGON.— Avery  v.  Job,  25  Ore.  512,  36  Pac.  293. 

RHODE  ISLAND.— Austin  v.  Coggeshall,  12  R.  I.  329,  34  Am. 
Rep.  648. 

TEXAS.— Waterbury  v.  Laredo,  68  Tex.  565,  5  S.  W.  81. 


§11  PUBLIC   UTILITIES.  30 

That  the  power  of  municipal  corporations  of  a 
business  character  vests  in  the  corporations  the  neces- 
sary control  and  discretion  with  regard  to  their  action 
or  power  to  provide  or  contract  with  another  for  their 
supply  of  water  is  well  expressed  by  the  early  leading 
case  of  Des  Moines  Gas  Co.  v.  Des  Moines,  44  Iowa 
505,  24  Am.  Rep.  756,  decided  in  1876,  as  follows: 
"Within  the  sphere  of  their  delegated  powers  munici- 
pal corporations  have  as  absolute  control  as  the  gen- 
eral assembly  would  have  if  it  never  had  delegated 
such  powers  and  exercised  them  by  its  own  laws. 
Taylor  v.  Carondelet,  22  Mo.  no;  Heland  v.  Lowell, 
3  Allen  (Mass.)  408.  .  .  .  The  discretion  of  such 
corporations  within  the  sphere  of  their  powers  is  as 
wide  as  that  possessed  by  the  government  of  the  state. 
St.  Louis  V.  Bofifinger,  19  Mo.  15.  And  discretionary 
powers  are  to  be  exercised  according  to  their  judg- 
ment as  to  the  necessity  or  expediency  of  any  given 
measure.  Kelley  v.  Milwaukee,  18  Wis.  85.  .  .  . 
The  fact  that  the  ordinance  sought  to  be  enjoined 
amounts  to  a  contract  with  another  gas  company  by  no 
means  deprives  it  of  its  legislative  character.  These  cor- 
porations must  be  permitted  to  promote  the  welfare 
of  the  inhabitants  thereof  in  their  own  way,  so  far  as 
the  form  their  respective  ordinances  shall  assume  is 
concerned.  Suppose  the  city  had  determined  to  put 
in  gas  works,  to  be  owned  and  controlled  by  the  city, 
and  thereby  supply  the  public  lamps  and  buildings 
with  gas,  and  by  ordinance  so  provided;  could  such  an 
ordinance  be  enjoined,  or  would  this  have  been  right- 
ful legislation?     And  because  the  city  chose  by  ordi- 


UNITED  STATES.— Vicksburg  v.  Vicksburg  Waterworks  Co., 
206  U.  S.  496,  51  L.  ed.  1155. 

VIRGINIA.— Winchester  v.  Redmond,  93  Va.  711,  25  S.  E.  1001, 
57  Am.  St.  822. 

WYOMING.— Edwards  v.  Cheyenne,  19  Wyo.  110,  114  Pac.  677. 


31  CONSTRUCTION    OF    CHARTERS.  §  12 

nance  to  contract  with  some  one  to  do  the  same  thing, 
does  that  make  it  wrongful?" 

§  12.  Power  by  implication. — In  the  construction 
of  municipal  charters  for  the  purpose  of  defining  and 
fixing  the  nature  and  extent  of  the  powers  of  munici- 
palities, whether  express  or  implied,  the  court  con- 
cedes to  them  a  wide  discretion,  as  is  shown  by  the 
case  of  Torrent  v.  Muskegon,  47  Mich.  115,  10  N.  W. 
132,  41  Am.  Rep.  715,  decided  in  1881,  in  which  the 
court  refused  to  enjoin  the  carrying  out  of  a  contract 
for  the  building  of  the  city  hall  and  said:  "But  in 
saying  this,  we  do  not  assume  that  it  belongs  to  this 
court,  or  any  other,  to  dictate  to  the  city  how  it  shall 
spend  its  money.  The  council  must  use  its  own  dis- 
cretion where  it  will  save  and  where  it  will  spend;  and 
the  case  must  be  a  very  clear  one,  and  the  subterfuge 
very  plain,  before  that  discretion  can  be  regarded  as 
having  been  exceeded  so  as  to  show  an  excess  of  power 
under  a  pretense  of  keeping  within  it.  It  is  not  the 
business  of  courts  to  act  as  city  regulators,  and  unless 
the  authority  of  the  representatives  of  the  citizens  has 
been  exceeded,  their  action  can  not  be  interfered  with 
merely  because  it  may  not  seem  to  other  persons  to  be 
as  wise  as  it  might  be. 

If  cities  were  new  inventions,  it  might  with  some 
plausibility  be  claimed  that  the  terms  of  their  char- 
ters, as  expressed,  must  be  the  literal  and  precise 
limits  of  their  powers.  But  cities  and  kindred  munici- 
palities are  the  oldest  of  all  existing  forms  of  govern- 
ment, and  every  city  charter  must  be  rationally 
construed  as  intended  to  create  a  corporation  which 
shall  resemble  in  its  essential  character  the  class  into 
which  it  is  introduced.  There  are  many  flourishing 
cities  whose  charters  are  very  short  and  simple  docu- 
ments.    .     .     .     But  if  we  were  to  assume  that  there 


§  12  PUBLIC    UTILITIES.  32 

is  nothing  left  to  implication,  we  should  find  the 
longest  of  them  too  imperfect  to  make  city  action 
possible." 

In  the  case  of  Atlantic  City  Waterworks  Co.  v. 
Atlantic  City,  48  N.  J.  L.  378,  6  Atl.  24,  where  the  ac- 
tion was  to  recover  for  water  furnished  the  defendant 
city  under  a  contract  made  with  ample  legislative  au- 
thority, the  court  permitted  a  recovery  although  it 
was  urged  by  way  of  defense  that  the  contract  was 
perpetual  in  form  and  void  because  beyond  the  power 
of  the  city  to  make.  In  holding  that  it  had  no  power 
to  circumscribe  the  grant  in  question  the  court  ob- 
served that  if  the  ordinance  warranting  the  making 
of  this  contract  was  an  act  of  gross  indiscretion,  this 
court  could  have  adjudged  it  invalid  by  force  of  its 
prerogative  to  supervise  corporations  of  this  class. 

In  the  case  of  Columbus  Water  Co.  v.  Columbus, 
48  Kans.  99,  28  Pac.  1097,  15  L.  R.  A.  354,  decided  in 
1892,  the  defense  to  an  action  for  water  furnished  the 
defendant  city  being  its  inability  to  make  an  exclusive 
contract  for  such  service,  the  court  in  permitting 
recovery,  observed :  "Neither  would  we  apply  the 
rule  with  the  same  strictness  to  municipal  corporations 
that  should  govern  private  corporations  organized  for 
gain.  Courts  should  be  governed  by  the  conditions 
and  circumstances  surrounding  municipalities,  and  re- 
gard them  as  branches  of  the  sovereign  government. 
When  improved  methods  are  offered,  which  will  give 
to  the  city  better  facilities  in  the  way  of  water,  lights 
and  travel,  or  in  any  other  manner  give  to  its  inhabi- 
tants increased  safety  and  protection,  the  governing 
power  of  the  city  should  be  free  to  act,  but  until  such 
time  comes  courts  should  not  set  aside  contracts 
which  have  been,  in  part  at  least,  executed,  unless  for 
some  good  cause." 


33  CONSTRUCTION    OF    CHARTERS.  §  I3 

§  13.  Liberal  construction. — That  the  courts  favor 
a  Hberal  construction  of  the  private  or  proprietary- 
powers  granted  a  municipal  corporation  is  well  illus- 
trated by  the  case  of  the  Sun  Printing  &  Publishing 
Assn.  V.  New  York,  8  App.  Div.  (N.  Y.)  230,  152  N. 
Y.  257,  46  N.  E.  499,  37  L.  R.  A.  788,  decided  in  1896, 
which  was  sustained  and  reinforced  in  its  application 
by  the  case  of  Admiral  Realty  Co.  v.  New  York,  206  N. 
Y.  no,  99  N.  E.  241,  decided  June  29,  1912,  both  of 
which  cases  permit  the  city  of  New  York  to  build, 
maintain  and  operate  or  lease  its  underground  rapid 
transit  system.  The  progressive  spirit  of  the  decision  in 
extending  the  sphere  of  municipal  activity  to  meet  the 
needs  and  contribute  to  the  convenience  of  the  citizens 
is  as  interesting  and  striking  an  example  of  the  desire 
of  the  court  to  keep  abreast  of  our  civilization  as  it  is 
a  practical  illustration  of  the  necessity  of  their  doing 
so  if  municipal  corporations  and  their  rapidly  increas- 
ing population  are  to  be  permitted  to  have  and  enjoy 
the  modern  conveniences  and  more  recent  inventions. 
In  the  course  of  its  decision  the  court  observed  that: 
"In  considering  this  question  it  must  be  premised  that 
cities  are  not  limited  to  providing  for  the  strict  neces- 
sities of  their  citizens.  Under  legislative  authority, 
they  may  minister  to  their  comfort,  health,  pleasure, 
or  education.     .  .     To  hold  that  the  legislature  of 

this  state,  acting  as  the  parens  patriae,  may  employ 
for  the  relief  or  welfare  of  the  inhabitants  of  the  cities 
of  the  state  only  those  methods  and  agencies  which 
have  proved  adequate  in  the  past  would  be  a  narrow 
and  dangerous  interpretation  to  put  upon  the  funda- 
mental law.  No  such  interpretation  has  thus  far  been 
placed  upon  the  organic  law  by  the  courts  of  this  state. 
Whenever  the  question  has  been  considered,  it  has 
been  universally  treated  in  the  broadest  spirit.  .  .  . 
The  true  test  is  that  which  requires  that  the  work  shall 

3— Pub.  ut. 


§  13  PUBLIC    UTILITIES.  34 

be  essentially  public  and  for  the  general  good  of  all 
the  inhabitants  of  the  city.  It  must  not  be  under- 
taken merely  for  gain  or  for  private  objects.  Gain  or 
loss  may  incidentally  follow,  but  the  purpose  must  be 
primarily  to  satisfy  the  need  or  contribute  to  the  con- 
venience of  the  people  of  the  city  at  large.  Within 
that  sphere  of  action,  novelty  should  impose  no  veto. 
Should  some  inventive  genius  bye  and  bye  create  a 
system  for  supplying  us  with  pure  air,  will  the  repre- 
sentatives of  the  people  be  powerless  to  utilize  it  in 
the  great  cities  of  the  state,  however  extreme  the  want 
and  dangerous  the  delay?  Will  it  then  be  said  that 
pure  air  is  not  as  important  as  pure  water  and  clear 
light?     We  apprehend  not." 

A  further  interesting  illustration  of  the  spirit  of 
progress  which  induced  the  court  to  recognize  the 
increasing  demands  and  opportunities  which  come 
with  the  progress  of  civilization  in  its  tendency  to 
change  what  were  at  one  time  regarded  as  luxuries  into 
necessities  is  furnished  by  the  case  of  Holton  v. 
Camilla,  134  Ga.  560,  68  S.  E.  472,  31  L.  R.  A.  (N.  S.) 
116,  20  Am.  &  Eng.  Ann.  Gas.  199,  where  the  court 
held  that:  "If  a  city  has  the  right  to  furnish  heat  to 
its  inhabitants  because  conducive  to  their  health, 
comfort  and  convenience,  we  see  no  reason  why  they 
should  not  be  permitted  to  furnish  ice."  This  court 
accordingly  held  that  the  city  had  the  power  in  con- 
nection with  its  water-works  system  to  furnish  ice 
with  which  to  cool  the  water  as  demanded  by  the 
climate  of  certain  seasons  of  the  year  in  that  locality 
in  the  interest  not  only  of  the  convenience  and  com- 
fort of  the  citizens  but  for  sanitary  reasons  in  the 
preservation  of  their  health. 

These  principles  are  well  expressed  in  the  case  of 
Thomas  v.  Grand  Junction,  13  Colo.  App.  80,  56  Pac. 
665,  where  it  is  said:     "The  whole  spirit  of  the  law  is 


35  CONSTRUCTION    OF    CHARTERS.  §13 

SO  far  as  possible  to  permit  under  reasonable  restric- 
tions the  privilege  of  self-government.  In  fact,  that 
it  was  the  intent  of  the  legislature  in  its  grant  of 
pow^ers  to  municipal  corporations  to  give  them  the 
fullest  power  and  utmost  freedom  of  action  with  ref- 
erence specially  and  exceptionally  to  the  securing  of 
such  a  water  supply  as  might  be  deemed  needful,  is 
clearly  manifest  from  the  very  terms  of  the  act." 

In  the  case  of  Vincennes  v.  Citizens'  Gas  Light  Co., 
132  Ind.  114,  31  N.  E.  573,  this  rule  of  law  is  laid 
down  as  follows:  "The  making  of  contracts  for  the 
supply  of  gas  or  water  is  a  matter,  delegated  to  the 
governing  power  of  municipalities,  to  be  exercised 
according  to  their  own  discretion;  and  in  the  absence 
of  fraud,  while  acting  within  the  authority  delegated 
to  them,  their  action  is  not  subject  to  review  by  the 
courts.  The  length  of  time  for  which  they  shall  bind 
their  towns  or  cities  depends  upon  so  many  circum- 
stances and  conditions  as  to  situation,  cost  of  supply 
and  future  prospects,  that  the  courts  can  interfere  only 
in  extreme  cases  and  upon  reasonable  application." 

In  Conrey.v.  Water-works  Co.,  41  La.  Ann.  910, 
the  court  said:  "If  the  city  had  the  power  to  make 
the  contract,  and  confined  herself  within  the  limits  of 
the  power,  the  quantity  and  kind  of  water,  the  price, 
etc.,  were  matters  within  the  legislative  discretion  of 
the  city  council,  and  unless  there  is  fraud  in  the  exe- 
cution of  the  contract,  courts  will  not  inquire  into  this 
discretion."  Again  in  the  case  of  Janeway  v.  Duluth, 
65  Minn.  292,  68  N.  W.  24,  the  court  said:  "Whether 
or  not  a  new  water  plant  is  necessary  is  a  legislative 
question  and  not  a  judicial  one.  The  court  can  not 
substitute  its  judgment  for  that  of  the  city  council 
and  the  voters  of  the  city." 

The  case  of  Henderson  v.  Young,  119  Ky.  224, 
26   Ky.   L.    1 152,  83   S.   W.   583,   also  contains   a  good 


§  14 


PUBLIC    UTILITIES. 


36 


Statement  of  this  principle  as  well  as  the  reason  on 
which  it  is  founded:  "In  the  management  and  opera- 
tion of  its  electric  light  plant  a  city  is  not  exercising 
its  governmental  or  legislative  powers,  but  its  business 
powers,  and  may  conduct  it  in  the  maner  which 
promises  the  greatest  benefit  to  the  city  and  its  inhab- 
itants in  the  judgment  of  the  city  council;  and  it  is 
not  within  the  province  of  the  court  to  interfere  with 
the  reasonable  discretion  of  the  council  in  such  mat- 
ters." 

In  Edwards  v.  Cheyenne,  19  Wyo.  no,  114  Pac.  677, 
decided  in  191 1,  the  court  says:  "As  a  municipal 
corporation  may  lawfully  extend  its  system  of  water- 
works and  provide  additional  reservoir  facilities  for 
the  purpose  not  only  of  increasing  its  water  supply, 
but  as  well  for  the  purpose  of  improving  the  method 
of  caring  for  and  distributing  the  same,  and  whether, 
when,  and  in  what  manner  it  shall  so  do  are  matters 
exclusively  within  its  discretion,  when  properly  exer- 
cised and  in  good  faith,  and  may  further  dispose  of 
any  excess  of  water  supplied  by  the  system  for  other 
than  purely  municipal  uses,  it  follows  that  a  bare 
allegation  that  a  contract  by  which  the  municipality 
has  engaged  to  supply  water  from  such  system  of 
water-works  is  ultra  vires  and  unlawful  is  insufBcient 
to  justify  a  court  of  equity  in  avoiding  it,  or  in  re- 
straining the  work  of  constructing  the  system  or  the 
acquiring  or  taking  of  land  for  that  purpose." 


§  14.     Limitations   of  fraud   and  ultra  vires. — But 

unless  expressly  authorized  by  statute  municipal  cor- 
porations have  no  authority  to  furnish  entertainment 
for  guests  of  the  corporation  at  the  public  expense.  In 
doing  this  without  such  authority  the  courts  are  of 
the  opinion  that  there  is  an  abuse  of  discretion,  and 
that  expenses  are  incurred  which  the  citizens  should 


37  CONSTRUCTION    OF    CHARTERS.  §  I4 

not  be  made  to  pay.  This  rule  is  well  stated  in  the 
case  of  Gamble  v.  Watkins,  7  Hun  (N.  Y.)  448,  which 
was  an  action  to  recover  for  meals  and  lodging,  fur- 
nished in  entertaining  a  party  of  representatives  of  the 
press,  that  had  been  authorized  by  a  resolution  of  the 
board  of  trustees  of  said  village.  In  refusing  recovery 
the  court  said:  "We  think  that  the  defendant  had  no 
power  to  appropriate  money  for  the  entertainment 
of  a  company  of  editors  visiting  the  place.  This  is 
not  a  duty  for  which  the  municipality  was  created.  It 
is  said  that  the  expenditure  has  been  repaid  by  the 
effect  on  the  village  of  subsequent  editorial  puffs.  But 
it  is  not  proper  for  village  trustees  to  hire  editors  to 
praise  the  attractions  of  the  place.  If  it  had  been 
shown  that  the  editors  were  paupers,  then,  under  the 
duty  of  a  village  to  take  care  of  the  poor,  there  might 
have  been  some  propriety  in  keeping  them  from  starv- 
ing." Again  in  the  case  of  Austin  v.  Coggeshall,  12 
R.  I.  329,  34  Am.  Rep.  648,  the  court  permanently 
restrained  the  payment  by  the  city  treasurer  of  an 
account  incurred  in  entertaining  officers  of  certain 
British  ships  of  war  while  in  Newport  harbor.  "The 
defense  would  be  more  meritorious  if  the  persons  in 
whose  behalf  it  is  interposed  had  any  claim  on  the 
city  for  value  received.  But  they  have  none.  The  city 
neither  danced  at  the  ball  nor  feasted  at  the  banquet. 
It  got  nothing  substantial  out  of  them.  .  .  .  It  is 
well  settled  that  a  municipal  corporation,  when  sued 
directly  on  a  contract  which  it  is  incapable  of  making, 
can  not  be  estopped  from  taking  advantage  of  its 
incapacity  because  the  party  suing  has  acted  on  the 
contract  in  good  faith." 

These  cases  then  will  serve  to  illustrate  the  limita- 
tions which  the  courts  place  on  the  discretion  of  the 
municipality  in  cases  of  its  abuse  in  order  to  protect 
the  citizens.     In  refusing  recover\'  for  services  to  the 


§15  PUBLIC    UTILITIES.  38 

city,  rendered  in  good  faith,  the  court  shows  how  far 
it  will  go  to  protect  the  citizens  against  an  abuse  of 
power  by  their  servants,  the  municipal  authorities,  and 
invokes  the  well  accepted  rule  of  law  which  requires 
the  individual  to  know  the  extent  of  the  authority 
possessed  by  the  municipality  in  contracting  with  it. 
And  as  it  is  axiomatic  that  fraud  vitiates  everything 
it  touches,  it  follows  that  where  fraud  is  found  the 
courts  will  not  respect  the  discretionary  rights  of 
municipal  corporations.^ 

§  15.  Power  to  dispose  of  surplus  capacity. — That 
the  attitude  of  our  courts  favors  the  fair  exercise  of 
the  discretion  vested  in  municipal  corporations  in 
connection  with  powers  granted  to  them,  and  that  such 
corporations  are  not  limited  strictly  to  their  actual 
needs  and  demands  at  any  particular  time,  but  that 
municipalities  may  by  way  of  anticipation  determine 
their  capacity  and  build  for  the  future,  is  well  estab- 
lished. If  the  municipal  corporation  owns  buildings 
and  equipment  and  has  employed  men  to  discharge  its 
duties  which  do  not  require  the  entire  service  of  such 
properties  or  men,  it  may  contract  for  their  use  for 
private  purposes.  The  courts  generally  permit  this 
temporary  diversion  of  forces,  lawfully  employed  by 
the  city  for  public  service,  to  the  performance  of  pri- 
vate work  under  contract,  but  only  to  the  extent  that 
there  is  a  surplus  of  such  forces.  This  privilege  of 
subletting  such  excess  properties  or  the  use  of  its  sur- 
plus forces  is  granted  by  the  courts  in  the  absence  of 
any  express  statutory  authority  for  the  practical  pur- 
pose of  saving  the  loss  that  would  result  from  their 
nonuser.     But  authority  must  always  be  found  in  the 

3  Ft.  Scott  V.  Eads  Brokerage  Co.,  117  Fed.  51 ;  Waterbury  v. 
Laredo,  68  Tex.  565,  5  S.  W.  81;  First  Nat.  Bank  v.  Sarlls,  129 
Ind.  201,  28  N.  E.  434,  13  L.  R.  A.  481;  Winchester  v.  Redmond, 
93  Va.  711,  25  S.  E.  1001,  57  Am.  St.  822. 


39  CONSTRUCTION    OF    CHARTERS.  §15 

first  instance  for  the  employment  of  these  forces  and 
the  acquirement  of  the  equipment  for  serving  the  pub- 
he  so  that  their  use  for  private  purposes  is  only  tem- 
porary and  incidental.  A  municipal  corporation,  hav- 
ing in  its  public  buildings  rooms  which  the  court  held 
it  had  the  authority  to  build  looking  to  the  future 
growth  and  the  consequent  increased  demands  for  ad- 
ditional rooms,  which  were  not  needed  for  the  time 
being  for  public  purposes,  is  not  obliged  to  let  them 
stand  idle  but  may  realize  a  revenue  by  renting  them 
for  private  purposes.* 

An  interesting  illustration  and  statement  of  this 
principle  is  furnished  by  the  case  of  The  Maggie  P, 
25  Fed.  202,  decided  in  1885,  which  was  an  action  for 
breach  of  contract  in  failing  to  pump  water  out  of  a 
sunken  boat  and  to  raise  it  that  was  made  by  the  city 
of  St.  Louis  which  had  control  of  its  levies  and  harbor 
and  was  bound  to  keep  its  wharf  free  from  wrecks. 
While  observing  that  a  city  could  not  make  a  con- 
tract for  the  discharge  of  a  purely  public  duty,  the 
court  held  this  contract  valid  and  the  city  liable  for 
its  breach  in  the  following  language:  "At  the  same 
time,   when   it   has   in   its   possession   instrumentalities, 

*  COLORADO.— Colorado  Springs  v.  Colorado  City,  42  Colo.  75, 
94  Pac.  316. 

FEDERAL.— Pikes  Peak  Power  Co.  v.  Colorado  Springs,  105  Fed. 
1;  Riverside,  &c.,  R.  Co.  v.  Riverside,  118  Fed.  736;  The  Maggie 
P.  25  Fed.  202. 

INDIANA.— Scott  V.  La  Porte,  162  Ind.  34,  6S  N.  E.  278. 

KENTUCKY.— Rogers  v.  Wickliffe,  29  Ky.  L.  587,  94  S.  W.  24. 

MARYLAND.— Gottlieb-Knabe  &  Co.  v.  Macklin,  109  Md.  429, 
71  Atl.  949,  31  L.  R.  A.   (N.  S.)  580. 

MASSACHUSETTS.— French  v.  Quincy.  3  Allen  (Mass.)  9; 
George  v.  School  District,  6  Mete.  (Mass.)  497;  Wheelock  v.  Lowell, 
196  Mass.  220,  81  N.  E.  977;  Worden  v.  New  Bedford,  131  Mass.  23, 
41  Am.  Rep.  185;  Davis  v.  Rockport,  (Mass.)  100  N.  E.  612. 

NEBRASKA.— Bell  v.  David  City   (Neb.),  142  N.  Y.  523. 

TEXAS.— Crouch  v.  McKinney,  47  Tex.  Civ.  App.  54,  104  S.  W. 
618;  Paris  v.  Sturgeon,  50  Texas  Civ.  App.  519,  110  S.  W.  459. 

WASHINGTON.— Farwell  v.  Seattle,  43  Wash.  141,  86  Pac.  217. 


§   15  PUBLIC    UTILITIES.  4O 

and  hires  employes  for  the  purpose  of  discharging 
some  public  duty,  I  see  no  reason  why,  when  the  exi- 
gencies of  public  duties  do  not  require  the  use  of  those 
instrumentalities  and  employes,  it  may  not  make  a 
valid  contract  to  use  them  in  private  service.  Thus, 
take  the  fire  department.  The  city,  having  its  engines 
and  firemen,  might  make  a  valid  contract  with  me  to 
pump  water  out  of  a  cellar,  and  compel  me  to  pay  for 
this  service.  .  .  .  And,  generally  speaking,  when 
public  duty  does  not  interfere  with  private  service  a 
city  may  make  a  valid  contract  for  the  use  of  its  in- 
strumentalities in  the  latter. 

Now,  pumping  water  out  of  a  sunken  boat  and 
raising  it  is  a  matter  of  principally  private  interest  to 
the  owner  of  the  boat.  .  .  .  It  is  also  true  that 
there  is  no  authority  in  any  ordinance,  etc.,  specifically 
empowering  any  officer  of  the  city  to  contract  for 
doing  this  kind  of  service.  But  I  do  not  think  that  is 
very  material,  because  the  testimony  shows  that  the 
city,  through  its  officers,  has  been  in  the  habit  of 
making  these  contracts  and  receiving  compensation 
therefor;  and  having  made  that  a  business,  etc.,  it  does 
not  lie  in  its  mouth  to  say  now  that  there  was  no 
officer  authorized  by  ordinance  to  make  this  kind  of  a 
contract." 

The  case  of  Pikes  Peak  Power  Co.  v.  Colorado 
Springs,  105  Fed.  i,  offers  a  good  statement  of  this 
rule  of  law,  together  with  the  reason  upon  which  it  is 
founded:  "But  it  is  equally  true  that  municipalities 
and  their  officers  have  the  power  and  use  of  all  public 
utilities  under  their  control  for  the  benefit  of  their 
cities  and  citizens,  provided  always  that  such  applica- 
tion does  not  materially  impair  the  usefulness  of  these 
facilities  for  the  purpose  for  which  they  were  pri- 
marily created.  .  .  .  Where  a  city  has  had  legis- 
lative authority  to  erect  a  dam  for  the  purpose  of  pro- 


41  CONSTRUCTION    OF    CHARTERS.  §15 

viding  water-works  for  the  city,  it  might  lawfully 
lease  for  private  purpose  any  excess  of  water  not  re- 
quired for  its  water-works.  This  is  a  just  and  reason- 
able rule.  It  is  a  rule  not  inconsistent  with  any  prin- 
ciple of  law  or  equity  and  in  accord  with  that  good 
sense  and  good  business  principles  which  recognize 
as  a  public  good  the  growth  of  two  blades  of  grass 
where  but  one  grew  before,  and  the  conversion  of 
waste  to  use." 

The  case  of  George  v.  School  District,  6  Mete. 
(Mass.)  497,  decided  in  1843,  questioned  the  authority 
to  erect  a  second  story  for  a  hall  over  the  public  school 
room  which  was  to  be  for  the  occasional  use  of  the 
school.  In  upholding  the  contract,  however,  the  court 
observed:  "This  also  was  matter  of  expediency.  If 
the  district  considered  that  a  hall,  or  the  occasional  use 
of  a  hall,  would  be  beneficial  to  the  school,  we  think  it 
was  within  their  power  to  provide  for  it,  as  incidental 
to  the  general  power  to  provide  a  school  house. 
Spaulding  v.  Lowell,  23  Pick.  (Mass.)  71." 

The  same  principle  is  sustained  by  the  Supreme 
Court  of  Massachusetts  in  the  recent  case  of  Wheelock 
V.  Lowell,  196  Mass.  220,  81  N.  E.  977,  decided  in 
1907,  permitting  certain  private  uses  to  be  made  of  a 
town  hall  which  had  been  erected  with  proper  au- 
thority as  an  assembly  for  the  inhabitants,  the  court 
saying:  "The  reported  facts  show  a  substantial  use 
of  Huntington  Hall  for  political  rallies,  conventions 
and  other  public  meetings  of  citizens,  although  from 
time  to  time  it  had  been  rented  for  purposes  of  amuse- 
ment and  instruction.  That  the  building  has  been  also 
let  for  private  uses,  when  not  required  for  public  needs, 
does  not  affect  the  general  legal  purpose." 

This  principle  together  with  its  practical  applica- 
tion and  the  reason  upon  which  it  is  founded  is  well 
defined  by  the  case  of  Riverside,  &c.  R.  Co.  v.  River- 


§  15  PUBLIC    UTILITIES.  42 

side,  ii8  Fed.  736,  decided  in  1902,  where  the  defend- 
ant city  had  contracted  with  the  plaintiff  railway  com- 
pany for  the  sale  of  its  surplus  electrical  power.  In 
sustaining  such  contract  the  court  said:  "The  power 
contracted  to  be  furnished  to  complainant  by  said  city 
was,  at  the  date  of  the  contract,  surplus  power,  that  is 
to  say,  power  received  by  said  city  under  its  contract 
with  the  Redlands  Electric  Light  and  Power  Com- 
pany, and  not  required  by  users  of  Hght  or  power 
other  than  complainant.  .  .  .  Complainant  is  not 
in  default  upon  its  contract,  but  defendants  have 
threatened  to,  and,  unless  restrained  by  this  court,  will 
sever  the  connection  between  its  wires  and  the  Red- 
lands'  wires,  and  cut  off  the  Redlands'  electricity  from 
complainant,  and  by  so  doing,  prevent  the  running  of 
complainant's  cars  and  the  operation  of  its  street 
railway.  ...  It  was  under  the  conditions  above 
named  that  the  city  entered  into  its  contract  with  the 
complainant,  and,  bearing  in  mind  that  the  acquisi- 
tion, construction,  maintenance,  and  operation  of  street 
railways  are  among  the  declared  purposes  of  the  city's 
organization,  the  conclusion  seems  to  be  unavoidable 
that  said  contract  was  within  the  scope  of  the  city's 
powers,  and  its  obligations  can  not  be  terminated  or 
changed  by  any  subsequent  increase  in  the  demand  for 
electrical  lighting." 

In  the  case  of  Crouch  v.  McKinney,  47  Tex.  Civ. 
App.  54,  104  S.  W.  518,  decided  in  1907,  the  city,  hav- 
ing established  an  electric  light  plant  the  capacity  of 
which  for  the  time  being  was  greater  than  necessary 
for  the  lighting  of  its  streets,  was  permitted  to  sell  the 
excess  or  surplus  in  supplying  lights  to  individual  citi- 
zens for  their  private  use,  the  court  observing  that: 
"When  the  city  has  a  surplus  of  power,  after  discharg- 
ing its  duty  to  the  public,  there  seems  to  be  no  question 
of  its  authority  to  sell  the  excess  to  private  citizens. 


43  CONSTRUCTION    OF    CHARTERS.  §  I5 

Nalle  V.  Austin,  21  S.  W.  380."  The  case  of  Colorado 
Springs  v.  Colorado  City,  42  Colo.  75,  94  Pac.  316, 
decided  in  1908,  permitted  the  city  to  dispose  of  its 
excess  supply  of  water,  and  having  made  a  contract 
to  do  so,  the  city  was  held  liable  to  the  faithful  per- 
formance of  such  contract  and  it  was  not  permitted 
to  set  up  the  plea  of  lack  of  authority  by  way  of 
defense. 

The  limitations  placed  upon  this  rule  by  the  courts 
is  suggested  by  the  case  of  Gottlieb-Knabe  &  Co.  v. 
Macklin,  109  Md.  429,  71  Atl.  949,  31  L.  R.  A.  (N.  S.) 
580,  decided  in  1909,  where  the  court  said:  "This  is 
not  the  case  of  a  municipal  corporation  perverting  the 
functions  of  government  by  deliberately  and  indefi- 
nitely engaging  in  business  for  profit,  and  entering 
into  competition  with  its  taxpayers,  from  whom  it 
exacts  a  license  which  it  does  not  itself  pay.  It  is  but 
the  temporary,  casual,  and  incidental  use  of  unused 
public  property,  done  in  the  practice  of  a  public  econ- 
omy to  avoid  loss  of  revenue  upon  such  unused  public 
property,  and  to  lighten  thereby  the  general  burden 
of  taxation." 

In  the  case  of  Farwell  v.  Seattle,  43  Wash.  141,  86 
Pac.  217,  decided  in  1906,  an  injunction  was  granted 
to  prevent  the  defendant  city  from  contracting  to  fur- 
nish water  to  the  adjoining  city  of  Ballard  for  the 
reason  that  the  authority  of  the  city  was  limited  to 
its  own  territory  and  that  power  would  not  be  implied 
permitting  it  to  supply  neighboring  cities  with  water. 
It  does  not  appear  from  the  case  that  the  contract  was 
for  temporary  service  or  that  it  was  limited  to  the 
surplus  water  of  the  city  so  that  the  case  serves  as  an 
illustration  of  the  proper  limitation  of  the  principle  in 
question.  The  court  expressed  its  decision  in  the  fol- 
lowing language :  "It  thus  appears  from  the  foregoing 
that  the  power  conferred  upon  the  city  by  the  legisla- 


§15 


PUBLIC   UTILITIES. 


44 


ture  and  also  by  the  city  charter  is  Hmited  to  the 
ownership  and  operation  of  the  water-works  for  the 
purpose  of  supplying  the  city  'and  its  inhabitants  with 
water.'  A  municipal  corporation  is  limited  in  its 
powers  to  those  granted  in  express  words  or  to  those 
necessarily  or  fairly  implied  in  or  incident  to  the 
powers  expressly  granted,  and  also  to  those  essential 
to  the  declared  objects  and  purposes  of  the  corpora- 
tion. It  is  a  general  principle  that  a  municipal  cor- 
poration can  not  usually  exercise  its  powers  beyond  its 
own  limits,  and  if  in  any  case  it  has  authority  to  do  so, 
it  must  be  derived  from  some  statute  which  expressly 
or  impHedly  permits  it.  The  doctrine  of  ultra  vires 
is  applied  with  greater  strictness  to  municipal  bodies 
than  to  private  corporations.  .  .  .  Tested  by  the 
above-mentioned  principles  and  by  the  statutory  and 
charter  authority  above  quoted,  the  power  of  the  city 
of  Seattle  to  furnish  water  from  its  own  plant  is 
limited  to  the  city  itself  and  its  own  inhabitants." 


CHAPTER  IV. 

WHAT  ARE  MUNICIPAL  PURPOSES  WITHIN 
THE  MEANING  OF  THE  CONSTITUTION. 


Section. 

16.  Providing  municipal  public  utilities  discretionary. 

17.  Powers  of  municipal  corporations  fixed  by  construction. 

18.  Liberal  construction  of  "municipal  purposes." 

19.  Municipal  public  utilities  as  "municipal  purposes." 

20.  Water-works  a  municipal  purpose. 

21.  Electric  light  plant. 

22.  Brooklyn  bridge. 

23.  Rapid  transit  system. 

24.  Public  memorial  monument. 

25.  Power  to  lease  municipal  rapid  transit  system. 

26.  Natural  gas  plant. 

27.  Convention  hall. 

28.  Public  wharves. 


§  1 6.  Providing  municipal  public  utilities  discre- 
tionary.— All  the  functions  and  powers  belonging  to 
municipal  corporations  which  are  not  governmental 
and  public  are  strictly  municipal  and  proprietary. 
Within  this  latter  class  of  functions  and  belonging  to 
the  private  business  capacity  of  municipal  corpora- 
tions are  municipal  public  utilities.  The  powers 
granted  and  the  duties  consequently  imposed  upon 
municipal  corporations  with  reference  to  their  munici- 
pal public  utilities  are  discretionary  and  not  imperative 
in  their  nature  because  the  providing  of  such  public 
utilities  is  a  matter  resting  in  the  discretion  of  the 
municipal  corporation,  and  unless  such  discretion  is 
grossly  abused,  its  exercise  will  not  be  interfered  with 
by  the  courts. 

45 


§  17  PUBLIC    UTILITIES.  46 

§  17.  Powers  of  municipal  corporations  fixed  by 
construction. — Such  powers,  indeed,  are  granted  by 
the  legislature  of  the  state  for  the  special  use  and 
private  advantage  of  the  municipal  corporation.  In 
granting  and  regulating  these  powers  the  legislature 
in  turn  is  subject  to  the  limitations  of  both  the  federal 
and  state  constitutions,  and  the  attitude  of  our  courts 
in  their  construction  of  these  constitutional  limitations 
on  the  powers  vested  in  municipalities  by  statutory 
enactment  with  reference  to  the  ownership  and  opera- 
tion of  municipal  public  utilities  largely  determines 
the  scope  of  the  power  of  such  municipal  corporations 
in  the  matter  of  providing  themselves  and  their  citizens 
with  the  advantages  of  municipal  public  utilities.  The 
important  and  ever  increasing  line  of  decisions  defin- 
ing the  constitutional  limitations  of  municipal  corpora- 
tions in  this  connection  and  fixing  the  nature  and 
extent  of  their  power  determines  what  are  municipal 
purposes  within  the  meaning  of  the  constitution. 

§  18.  Liberal  construction  of  "municipal  pur- 
poses."— The  judicial  construction  of  the  term  "mu- 
nicipal purpose"  in  this  connection  is  essential  in 
determining  the  extent  of  the  powers  of  municipal 
corporations  expressly  granted  by  statute,  and  in 
defining  these  statutory  powers  with  reference  to  the 
question  as  to  whether  they  are  concerned  with  munic- 
ipal purposes  within  the  meaning  of  the  constitution 
and  in  fixing  the  extent  to  which  the  people  may  be 
taxed  for  the  purpose  of  providing  these  municipal 
public  utilities.  And  while  any  abuse  of  authority 
which  would  result  in  the  imposition  of  taxation 
without  right  has  always  been  jealously  guarded 
against  by  our  courts  as  a  violation  of  one  of  the 
very  first  and  most  fundamental  of  the  principles  of 
our  government   since  the  day  of  Magna   Charta,   the 


47  MUNICIPAL    PURPOSES.  §  I9 

courts  have  been  liberal  in  extending  the  meaning  of 
the  term  "municipal  purpose"  so  as  to  permit  our 
municipalities  promptly  to  take  advantage  of  new  in- 
ventions and  modern  conveniences  for  their  private 
benefit   and  the   advantage   of  their  citizens. 

§  19.  Municipal  public  utilities  as  "municipal  pur- 
poses."— While  the  intention  of  the  legislature  as  ex- 
pressed in  the  statute  is  effective  only  when  within 
the  scope  of  the  constitutional  limitation,  in  deter- 
mining what  may  be  granted  by  the  statute  not  in- 
consistent with  the  constitution,  the  courts  have 
generally  been  favorable  to  the  granting  of  the  power 
and  upheld  the  statutes  providing  for  municipal  public 
utilities.  In  defining  the  extent  of  the  power  of  the 
municipal  corporation  to  provide  itself  with  municipal 
public  utilities  it  is  accordingly  necessary  to  determine 
what  public  utilities,  provided  for  by  statute,  are  in- 
cluded within  "municipal  pwirposes."^ 

'  CONNECTICUT.— Board  of  Water  Commissioners  (Conn.),  87 
Atl.  870. 

FLORIDA.— Jacksonville  Electric  Light  Co.  v.  Jacksonville,  36 
Fla.  229,  18  So.  677,  30  L.  R.  A.  540,  51  Am.  St.  24;  Middleton  v.  St. 
Augustine,  42  Fla.  287. 

MARYLAND.— Mealey  v.  Hagerstown,  92  Md.  741,  48  Atl.  746. 

MASSACHUSETTS.— Opinion  of  the  Justices,  150  Mass.  592,  24 
N.  E.  1084,  8  L.  R.  A.  487;  Opinion  of  the  Justices,  155  Mass.  598,  30 
N.  E.  1142,  15  L.  R.  A.  809;  Townsend  v.  Boston,  187  Mass.  283,  72 
N.  E.  991. 

MINNESOTA.— Minneapolis  v.  Janney,  86  Minn.  Ill,  90  N.  W. 
312. 

MISSISSIPPI.— Hazelhurst  v.  Mayes,  84  Miss.  7,  36  So.  33,  64  L. 
R.  A.  805. 

MISSOURI.— State  ex  rel.  v.  Allen,  178  Mo.  555,  77  S.  W.  868. 

NORTH  CAROLINA.— Greensboro  v.  Scott,  138  N.  C.  181,  50  S. 
E.  589. 

NEW  HAMPSHIRE.— Newport  v.  Unity,  68  N.  H.  587,  44  Atl. 
704,  73  Am.  St.  626. 

NEW  YORK.— Admiral  Realty  Co.  v.  New  York,  206  N.  Y.  110, 
99  N.  E.  241;  Comstock  v.  Syracuse,  5  N.  Y.  S.  874;  Hequembourg  v. 
Dunkirk,  49  Hun  (N.  Y.)  550,  2  N.  Y.  S.  447,  18  N.  Y.  St  570;  Parsons 


§  20  PUBLIC    UTILITIES.  48 

§  20.  Water-works  a  municipal  purpose. — In  the 
case  of  Comstock  v.  Syracuse,  5  N.  Y.  S.  874,  decided 
in  1889,  the  court  defines  the  term  "city  or  municipal 
purpose"  in  connection  with  its  holding  that  the  city 
may  provide  its  inhabitants  with  water,  supported  by 
the  following  practical  argument:  "It  has  already 
been  suggested  that  paramount  to  all  single  require- 
ments which  the  wants  of  a  city  demand  is  that  of  an 
abundant  supply  of  pure  and  wholesome  water.  The 
health  and  Hfe  of  the  citizens  are  involved  in  this,  and 
the  prosperity  of  the  city  and  the  safety  of  its  property 
are  dependent  upon  it.  In  the  light  of  its  importance 
we  have  in  this  state  invested  private  corporations, 
created  for  the  purpose  of  furnishing  water  to  villages 
and  cities,  with  the  extraordinary  power  of  the  exer- 
cise of  eminent  domain,  although  the  same  is  created 
for  and  looks  only  to  securing  to  its  promoters  in- 
dividual profit  alone.  I  am  not  aware  that  this  power 
is  invested  in  any  purely  private  corporation,  except 
organized  for  the  purpose  named.  While  it  is  true 
that  a  city  may,  if  it  so  elect,  rely  upon  the  efforts  of 
individuals  and  companies  for  its  water  supply, 
whether  it  shall  do  so  is  a  matter  of  discretion  on  its 
part.  The  necessities  of  the  case,  however,  are  so 
great,  and  the  welfare  of  the  people  so  much  involved 
in  the  furnishing  and  maintenance  of  a  reliable  and 
continuous  service,  that  prudence  would  seem  to  dic- 

V.  Van  Wyck,  56  App.  Div.  32y,  67  N.  Y.  S.  1054;  People  ex  rel.  Mur- 
phy V.  Kelly,  76  N.  Y.  475;  Sun  Printing  &  Publishing  Assn.  v.  New 
York,  8  App.  Div.  (N.  Y.)  230,  152  N.  Y.  257,  46  N.  E.  499,  37  L.  R.  A. 
788. 

OHIO.— State  ex  rel.  v.  Toledo,  48  Ohio  St.  112,  26  N.  E.  1061, 
11  L.  R.  A.  729. 

OKLAHOMA.— State  v.  Barnes,  22  Okla.  191,  97  Pac.  997. 

UNITED  STATES.— Hamilton  Gaslight  &  Coke  Co.  v.  Hamilton, 
146  U.  S.  258,  36  L.  ed.  963. 

.  VERMONT.— Burlington  v.   Central  Vermont  R.  Co.,  82  Vt.  5, 
71  Atl.  826. 


49  MUNICIPAL    PURPOSES.  §  21 

tate  that  satisfactory  results  will  be  made  more  secure 
where  the  city  assumes  this  important  duty,  and  at- 
tends to  its  performance.  In  the  light  of  these  sug- 
gestions I  find  no  difficulty  in  concluding  that  a  sup- 
ply of  water  for  city  purposes,  as  well  as  for  the  use 
of  its  inhabitants,  is  a  city  enterprise,  and  peculiarly 
for  a  city  purpose;  nor  are  we  without  authority  upon 
this  subject." 

§  21.  Electric  light  plant. — The  case  of  Hequem- 
bourg  V.  Dunkirk,  2  N.  Y.  S.  447,  18  N.  Y.  St.  570, 
49  Hun  (N.  Y.)  550,  decided  in  1888,  was  an  action 
to  enjoin  the  defendant  city  from  constructing  an 
electric  light  plant.  The  question  decided  by  this 
case  is  whether  the  issuing  of  bonds  to  establish  an 
electric  light  system  for  the  purpose  of  supplying  the 
said  city  and  its  inhabitants  with  electricity  is  in  vio- 
lation of  article  8,  section  11  of  the  Constitution, 
which  provides  that  "no  county,  city,  town  or  village 
shall  hereafter  give  any  money,  .  .  .  nor  shall 
any  such  county,  city,  town  or  village  be  allowed  to 
incur  any  indebtedness,  except  for  county,  city,  town 
or  village  purposes."  In  refusing  to  enjoin  the  erec- 
tion of  the  plant  the  court  held  that  furnishing  elec- 
tricity for  the  private  use  of  the  citizens  was  the 
performance  of  a  municipal  purpose  when  done  in 
connection  with  the  ownership  and  operation  of  the 
plant  for  supplying  the  public  needs  of  the  city,  saying 
in  part:  "We  think  it  may  safely  be  assumed  that 
the  lighting  of  the  streets  and  public  places  is  one  of 
the  duties  devolving  upon  the  municipal  government, 
and  is  a  city  purpose  within  the  provisions  of  the 
constitution.  What  is  and  what  is  not  a  municipal 
purpose  is,  in  many  cases,  doubtful  and  uncertain, 
and  it  is  the  duty  of  the  courts  in  such  cases  to  give 
weight    to    the    legislative    determination    and    not    to 

4— Pub.  Ut. 


§  22  PUBLIC    UTILITIES.  50 

annul  its  acts,  unless  it  clearly  appears  that  the  act 
was  not  authorized.  ...  If  we  are  correct  in  this 
view,  we  fail  to  see  why  gas  or  electric  light  works 
may  not  be  sanctioned  on  the  same  theory.  The 
lighting  of  the  streets  by  gas  involves  the  necessity 
of  laying  mains  through  the  streets,  with  which  the 
lamps  may  be  supplied  with  gas;  and,  in  lighting  by 
electricity,  the  stringing  of  wires  or  the  laying  of 
conduits,  through  which  the  electricity  may  be  con- 
veyed. Light  in  dwellings  is  as  important  and  essen- 
tial as  upon  the  streets,  and  promotes  the  general 
comfort,  safety  and  welfare  of  the  inhabitants ;  and 
when  it  is  supplied  in  connection  with  that  which  is 
furnished  by  the  municipality,  under  its  duty  to  the 
public,  we  think  it  may  be  regarded  as  an  incident 
thereto,  and  one  of  the  purposes  for  which  the  munici- 
pality may  properly  contract." 

§  22.  Brooklyn  bridge. — The  case  of  People  ex 
rel.  Murphy  v.  Kelly,  76  N.  Y.  475,  decided  in  1879, 
is  a  leading  one  and  indicates  the  liberal  policy  of  the 
courts  in  this  connection  to  be  one  of  long  standing. 
In  the  course  of  its  decision,  finding  that  the  cities 
concerned  had  the  power  to  erect  the  Brooklyn  bridge, 
the  court  said:  "Having  nothing  to  say  about  the 
wisdom  of  the  legislation  under  consideration,  I  am 
confident  in  the  conclusion  that  the  construction  of 
this  bridge  is  a  city  purpose  of  each  city,  and  that  each 
city  can  incur  debt  for  the  same,  and  that  the  act  of 
1875  ^s  not  in  conflict  with  any  provisions  of  the 
constitution." 

§  23.     Rapid    transit    system. — The    case    of    Sun 

Printing  &  Publishing  Assn.  v.  New  York,  8  App. 
Div.  (N.  Y.)  230,  152  N.  Y.  257,  46  N.  E.  499,  37  L. 
R.   A.    788,   decided   in    1897,   is   of   special   interest   as 


51  MUNICIPAL    PURPOSES.  §  23 

showing  the  attitude  of  the  court  with  reference  to  the 
increasing  and  elastic  powers  belonging  to  municipal 
corporations.  The  court  defined  its  position  on  the 
question  clearly  and  frankly  as  follows :  "The  ques- 
tion is  then  raised  whether  a  rapid  transit  railroad, 
wholly  within  the  limits  of  a  city,  is  a  city  purpose. 
.  .  .  In  considering  this  question  it  must  be  pre- 
mised that  cities  are  not  limited  to  providing  for  the 
strict  necessities  of  their  citizens.  Under  legislative 
authority,  they  may  minister  to  their  comfort,  health, 
pleasure,  or  education.  ...  To  hold  that  the 
legislature  of  this  state,  acting  as  the  parens  patriae, 
may  employ  for  the  relief  or  welfare  of  the  inhabi- 
tants of  the  cities  of  the  state  only  those  methods 
and  agencies  which  have  proved  adequate  in  the  past 
would  be  a  narrow  and  dangerous  interpretation  to 
put  upon  the  fundamental  law.  No  such  interpreta- 
tion has  thus  far  been  placed  upon  the  organic  law 
by  the  courts  of  this  state.  Whenever  the  question 
has  been  considered,  it  has  been  universally  treated 
in  the  broadest  spirit.  .  .  .  The  true  test  is  that 
w^hich  requires  that  the  work  shall  be  essentially 
public  and  for  the  general  good  of  all  the  inhabitants 
of  the  city.  It  must  not  be  undertaken  merely  for 
gain  or  for  private  objects.  Gain  or  loss  may  inci- 
dentally follow,  but  the  purpose  must  be  primarily 
to  satisfy  the  need  or  contribute  to  the  convenience 
of  the  people  of  the  city  at  large.  Within  that  sphere 
of  action,  novelty  should  impose  no  veto.  Should 
some  inventive  genius  bye  and  bye  create  a  system 
for  supplying  us  with  pure  air,  will  the  representatives 
of  the  people  be  powerless  to  utilize  it  in  the  great 
cities  of  the  state,  however  extreme  the  want  and 
dangerous  the  delay?  Will  it  then  be  said  that  pure 
air  is  not  so  important  as  pure  water  and  clear  light? 
^^'e  apprehend  not." 


§  24  PUBLIC    UTILITIES.  52 

§  24.  Public  memorial  monument. — The  New 
York  Supreme  Court  in  1900  reiterated  its  favorable 
attitude  toward  the  increase  of  the  sphere  of  munici- 
pal activity  in  the  case  of  Parsons  v.  Van  Wyck,  56 
App.  Div.  (N.  Y.)  329,  67  N.  Y.  S.  1054.  In  this 
case  it  refused  relief  in  an  action  brought  by  a  tax- 
payer to  restrain  an  alleged  unlawful  expenditure  of 
municipal  funds  by  the  defendants,  who  were  members 
of  the  Soldiers'  and  Sailors'  Memorial  Arch  Com- 
mission of  the  city  of  New  York  provided  for  by 
chapter  522  of  the  Laws  of  1893,  and  were  engaged 
in  erecting  a  proposed  memorial  monument  in  River- 
side Park  near  Eighty-ninth  street.  The  court  stated 
its  decision  after  referring  to  other  similar  cases  by 
saying,  "In  the  same  liberal  spirit,  we  think  the  erec- 
tion of  a  beautiful  monument  or  memorial  is  serving 
a  public  purpose." 

§  25.  Power  to  lease  municipal  rapid  transit  sys- 
tem.— The  case  of  Admiral  Realty  Co.  v.  New  York, 
206  N.  Y.  no,  99  N.  E.  241,  decided  June  29.'  1912, 
expressly  sustains  the  case  of  Sun  Printing  &  Pub- 
lishing Assn.  V.  New  York,  supra,  and  extends  the 
application  of  the  principle  which  permitted  the  build- 
ing and  leasing  for  operation  of  the  rapid  transit 
system  belonging  to  New  York  City  to  the  leasing  and 
operation  of  such  a  system  in  connection  with  that 
belonging  to  a  private  concern  for  the  purpose  of 
securing  a  unified  system  of  transportation  through- 
out the  city.  The  practical  advantage  to  the  citizens 
of  such  an  arrangement  was  considered  by  the  court  in 
deciding  that  such  a  construction  and  manner  of 
operating  the  transit  system  was  a  municipal  purpose 
within  the  meaning  of  the  Constitution  of  New  York, 
and  that  the  agreement  for  jointly  operating  the  two 
systems,    one    owned    by    the    city    and    the    other    by 


53  MUNICIPAL    PURPOSES.  §  2$ 

private  capital,  was  in  the  interest  of  economy  and 
for  the  convenience  of  the  citizens,  for  in  the  course 
of  its  decision,  the  court  said:  "The  question  is 
whether  the  municipahty,  instead  of  building  subways 
at  an  enormous  expense  over  the  entire  territory,  may 
build  them  in  part  of  it,  and  then  make  a  contract  for 
their  operation  with  the  owner  of  the  privately  owned 
system,  under  which  -the  latter  agrees  to  operate  its 
system  in  conjunction  with  the  subways,  and  subject 
to  a  single  fare.  It  seems  to  me  that  it  may  thus  do; 
and  that  the  statement  of  the  proposition  very  largely 
supplies  the  argument  in  its  favor." 

In  the  case  of  Townsend  v.  Boston,  187  Mass.  283, 
72  N.  E.  991,  decided  in  1905,  the  Supreme  Court  of 
Massachusetts  recognized  as  constitutional  and  held 
to  be  valid  a  statute  under  which  the  city  of  Boston 
owned  and  operated  a  certain  ferry.  The  case  was  an 
action  in  tort  for  personal  injuries  sustained  by  the 
plaintiff  to  the  action  while  a  passenger  on  a  ferry 
boat  which  the  defendant  city  owned  and  was  operat- 
ing. 

In  the  Opinion  of  the  Justices,  150  Mass.  592,  24 
N.  E.  1084,  8  L.  R.  A.  487,  as  given  in  1890,  in  reply 
to  certain  questions  submitted  to  the  court  by  the 
legislature,  it  is  held  that,  if  the  legislature  be  of  the 
opinion  that  the  general  welfare  and  convenience  of 
the  inhabitants  of  municipalities  will  be  promoted  by 
giving  the  cities  the  power  of  furnishing  them  with 
gas  or  electricity  for  light,  such  power  may  be  so 
conferred  within  the  constitution.  In  the  course  of 
its  opinion  the  court  said  that:  "The  statutes  are  well 
known  which  authorize  cities  and  towns  to  maintain 
water-works  for  supplying  their  inhabitants  with 
water,  and  the  constitutionality  of  these  statutes  has 
not  been  doubted."  The  court  defines  the  limitation 
to  be  placed  on  this  power  in  Opinion  of  the  Justices, 


§  26  PUBLIC    UTILITIES.  54 

155  Mass.  598,  30  N.  E.  1 142,  15  L.  R.  A.  209,  decided 
in  1892,  in  refusing  the  right  of  the  legislature  within 
the  constitution  to  confer  on  municipalities  the  power 
to  purchase  and  to  furnish  coal  and  wood  for  fuel  to 
its  inhabitants  because  the  carrying  on  of  such  a 
business  for  the  public  benefit  could  not  be  regarded  as 
a  public  or  municipal  service. 

The  case  of  Middleton  v.  St.  Augustine,  42  Fla. 
287,  decided  in  1900,  holds  that  under  the  Constitu- 
tion of  that  state  the  legislature  can  authorize  munici- 
pal corporations  to  erect  and  own  electric  light  plants 
for  supplying  lights  to  their  citizens  and  to  issue 
bonds  for  such  purpose,  either  with  or  without  the 
sanction  of  its  individual  citizens  or  taxpayers  because 
the  purpose  is  municipal. 

The  case  of  Mealey  v.  Hagerstown,  92  Md.  741, 
48  Atl.  746,  decided  in  1901,  states  this  well  estab- 
lished rule  of  law  as  follows:  "It  [the  defendant  city] 
is  certainly  authorized  to  provide  for  lighting  the 
streets  and  other  public  places  within  the  corporate 
limits.  We  do  not  understand  it  to  be  seriously  ques- 
tioned that  it  can  furnish  light  to  its  citizens,  if  the 
act  of  1900  is  valid.  There  are  many  cases  which 
establish  the  right  of  a  municipality,  owning  its  plant 
for  lighting,  to  provide  light  to  its  citizens  just  as  it 
may  supply  them  with  water,  if  the  legislature  so 
authorizes." 

§  26.  Natural  gas  plant. — The  case  of  State  ex 
rel  V.  Toledo,  48  Ohio  St.  112,  26  N.  E.  1061,  11  L. 
R.  A.  729,  decided  in  1891,  is  of  special  interest  be- 
cause it  refused  to  enjoin  the  defendant  city  from 
supplying  natural  gas  for  its  public  use  and  the  pri- 
vate use  of  its  inhabitants.  The  very  clear  and 
common-sense  reasoning  of  the  court  follows:  "Tax- 
ation  implies   an   imposition  for  a  public  use.     .     .     . 


55  MUNICIPAL    PURPOSES.  §  26 

But  what  are  public  purposes  is  a  question  that  must 
be  left  to  the  legislature,  to  be  decided  upon  its  own 
judgment  and  discretion.  Water,  light  and  heat  are 
objects  of  prime  necessity.  Their  use  is  general  and 
universal.  It  is  now  well  settled  that  the  legislature 
in  the  exercise  of  its  constitutional  power  may  au- 
thorize cities  to  appropriate  real  estate  for  water- 
works, etc.  What  we  have  said  in  reference  to 
water-works  is  for  the  most  part  applicable  to  the 
erecting  and  maintaining  of  natural  or  artificial  gas 
works.  Heat  being  an  agent  or  principle  indispensable 
to  the  health,  comfort  and  convenience  of  every 
inhabitant  of  our  cities,  we  do  not  see  why,  through 
the  medium  of  natural  gas,  it  may  not  be  as  much 
a  public  service  to  furnish  it  to  the  citizens  as  to 
furnish  water.  It  is  sufficient  if  every  inhabitant  who 
is  so  situated  that  he  can  use  it,  has  the  same  right  to 
use  it  as  the  other  inhabitants.  The  establishment 
of  natural  gas  works  by  municipal  corporations,  with 
the  imposition  of  taxes  to  pay  the  cost  thereof,  may 
be  a  new  object  of  municipal  policy;  but  in  deciding 
whether  in  a  given  case  the  object  for  which  taxes 
are  assessed  is  a  public  or  a  private  purpose,  we  can 
not  leave  out  of  view  the  progress  of  society,  the 
change  of  manners  and  customs  and  the  development 
and  growth  of  new  wants,  natural  and  artificial,  which 
may  from  time  to  time  call  for  a  new  exercise  of 
legislative  power;  and  in  deciding  whether  such  taxes 
shall  be  levied  for  the  new  purposes  that  have  arisen 
we  should  not,  we  think,  be  bound  by  an  inexorable 
rule  that  would  embrace  only  those  objects  for  which 
taxes  have  been  customarily  and  by  long  course  of 
legislation  levied."  The  validity  of  this  Ohio  Statute 
giving  municipal  corporations  the  power  to  supply 
their  inhabitants  with  gas  was  sustained  by  the 
Supreme   Court  of  the  United  States,  in  the  case  of 


§  27  PUBLIC    UTILITIES.  56 

Hamilton  Gaslight   &  Coke   Co.  v.   Hamilton,    146  U. 
S.  258,  36  L.  ed.  963. 

§  27.  Convention  hall. — The  case  of  State  v. 
Barnes,  22.  Okla.  191,  97  Pac.  997,  decided  in  1908, 
reflects  the  spirit  of  the  court  of  the  state  of  Oklahoma 
and  illustrates  the  comprehensive  scope  of  its  consti- 
tution in  sustaining  the  power  of  the  city  to  erect  a 
convention  hall  on  the  ground  that  it  is  a  public  build- 
ing to  be  used  to  accommodate  any  public  gathering 
of  the  people  of  the  city,  the  court  saying:  "Such 
act  of  the  legislature  is  a  contemporaneous  legislative 
construction  of  said  section  27  of  article  10  of  the 
Constitution  of  this  state,  and  clearly  declares  it  to 
be  the  judgment  of  the  legislative  department  of  the 
state  that  the  term  'public  utilities,'  as  used  in  that 
section  of  the  constitution,  includes  convention  halls. 
If  the  court  had  reason  to  doubt  that  a  convention 
hall  of  the  character,  and  constructed  for  the  purpose 
and  controlled  in  the  manner,  of  the  one  in  the  case 
at  bar  is  to  be  a  public  utility  within  the  meaning  of 
said  section  of  the  constitution,  such  act  of  the  legisla- 
ture would  be  persuasive  upon  this  court.  In  a  govern- 
ment where  the  right  of  public  assembly  for  the  re- 
dress of  grievances  is  guaranteed  to  the  people,  where 
the  policies  of  government  are  in  a  great  measure 
determined  at  pubhc  gatherings  of  the  people  in 
political  conventions,  where  the  lecture  platform  has 
become  so  important  a  factor  in  public  education,  and 
where  people  frequently  assemble  for  the  purpose  of 
discussing  and  devising  ways  and  means  of  promoting 
their  varied  interests,  a  place  in  large  cities  where 
such  gatherings  may  be  had  under  comfortable  hy- 
gienic conditions  is  not  only  a  public  convenience,  but 
a  public  necessity." 


57  MUNICIPAL    PURPOSES.  §  28 

§  28.  Public  wharves. — In  the  case  of  Burhngton 
V.  Cent.  Vt.  R.  Co.,  82  Vt.  5,  71  Atl.  826,  decided  in 
1909,  in  upholding  the  right  of  the  municipahty  to 
construct  pubHc  wharves  on  navigable  waters  because 
the  purpose  is  municipal,  while  recognizing  that  no 
valid  law  can  be  passed  to  raise  a  tax  unless  the  pur- 
pose for  which  it  is  collected  is  a  public  or  municipal 
one,  the  court  said  that  "What  is  a  municipal  purpose 
within  that  meaning  is  a  question  for  the  legislature  to 
decide,  and  concerning  which  it  has  a  large  discretion, 
which  the  courts  can  control  only,  if  at  all,  in  very 
exceptional  cases." 

In  sustaining  the  power  of  the  city  to  furnish  its 
inhabitants  with  electric  light  because  such  action 
would  be  for  their  best  interests  and  because  it  would 
be  a  municipal  purpose,  the  Supreme  Court  of  Florida 
in  Jacksonville  Electric  Light  Co.  v.  Jacksonville,  36 
Fla.  229,  18  So.  677,  30  L.  R.  A.  540,  51  Am.  St.  24, 
decided  in  1895,  expressed  this  well  established  prin- 
ciple by  saying:  "The  grant  of  power  to  the  city  of 
Jacksonville  to  provide  for  lighting  the  city  by  gas  or 
other  illuminating  material,  or  in  any  other  manner,  is 
clear  and  explicit,  and  carries  with  it  the  power  of  the 
choice  of  means  to  accomplish  the  end.  Should  this 
power  be  construed  into  a  right  to  light  the  streets 
and  public  places  of  the  city,  but  not  to  supply  the 
inhabitants  thereof  with  light  for  use  in  their  private 
houses?  .  .  .  We  are  of  the  opinion  that  a  fair 
construction  of  the  grant  'to  provide  for  lighting  the 
city  by  gas  or  other  illuminating  material,  or  in  any 
other  manner,'  will  authorize  the  erection  and  main- 
tenance of  an  electric  light  plant,  not  only  for  lighting 
the  streets  and  public  places  of  the  city,  but  also  for 
supplying  in  connection  therewith,  electric  light  for  the 
inhabitants  of  the  city  in  their  private  houses.  The 
power  given  is  to  light  the  city,   and  the  connection 


§  28  PUBLIC    UTILITIES.  58 

indicates  that  the  legislature  was  conferring  powers  for 
the  benefit  of  the  people  generally  of  the  city.  .  .  . 
That  supplying  the  inhabitants  of  a  city  with  electric 
light  is  such  a  municipal  purpose  as  will  authorize  its 
delegation  by  the  legislature  to  municipal  bodies  is 
sustained  by  all  the  authorities  we  have  found.  To 
the  extent  of  supplying  light  to  the  inhabitants  of  a 
city  for  use  in  their  private  houses,  we  discover  noth- 
ing that  can  not,  in  the  light  of  the  decisions,  be  called 
a  municipal  purpose." 


CHAPTER  V. 

THE   IMPLIED    POWERS    OF    MUNICIPAL 
CORPORATIONS. 


Section. 

29.  Power  to  provide  municipal   public  utilities  generally  implied, 

30.  Best  interests  of  municipality  the  test. 

31.  Only  general  powers  expressly  given  by  statute. 

32.  Statutory    power   to   provide   municipal    public    utilities   consti- 

tutional. 

33.  Electric  light  plant. 

34.  Steam  railroad  the  exception. 

35.  Three  grounds  for  doctrine  of  implied  powers. 

36.  The  police  power;    the  general  welfare;   municipal  purpose. 

37.  Increase  of  sphere  of  municipal  activity. 

38.  Power  and  duty  to  provide  municipal  public  utilities. 

39.  Electric  light  plant  by  virtue  of  police  power. 

40.  Sewer  system  provided  under  police  power. 
.41.  Water-works  and  electric  lighting. 

42.  The  general  welfare  clause  of  municipal  charters. 

43.  Rapid  transit  systems  as  modern  conveniences. 

44.  Modern  municipal  public  utilities  practical  necessities. 

45.  Water-works  the  oldest  and  most  necessary  utility. 

46.  Supply  of  municipal  public  utilities  for  private  use. 

47.  Joint  public  and  private  service  more  economical. 

48.  Ice  from  municipal  water-works,  an  economy  and  necessity. 

49.  Right  to  supply  private  service  by  implication  denied. 

50.  Electric  light  service  one  ot  most  modern. 

51.  Detailed    statutory    provisions    of    Massachusetts    strictly    con- 

strued. 

52.  The  rule  in  Illinois. 

53.  The  New  Jersey  decision. 

54.  The  California  rule  stated. 

55.  Municipality  limited  to  enterprises  of  public  nature. 

56.  Taxation  only  for  public  purposes. 

57.  Municipal   public   utilities   public   and  natural   monopolies. 

58.  Private  enterprises  controlled  by  competition. 

59.  Municipality  can  not  erect  opera  house. 

60.  Brick  making  a  private  business. 

59 


§  29  PUBLIC   UTILITIES.  60 

Section. 

61.  Sale  of  coal  and  wood  not  a  municipal  or  public  purpose. 

62.  Municipality  can  not  assist  private  enterprises. 

63.  Municipal  plumbing  not  incidental  to  its  water-works. 

64.  Municipal    coliseum    authorized    by    constitution — "home    rule." 


§  29.  Power  to  provide  municipal  public  utilities 
generally  implied. — The  principle  of  the  implied  pow- 
ers of  municipal  corporations  to  provide  themselves 
with  municipal  public  utilities  is  generally  recognized 
by  our  courts.  Through  their  liberal  recognition  of 
the  existence  of  implied  powers  more  than  in  any  other 
way  they  have  given  full  effect  to  the  purpose,  and 
practical  recognition  to  the  commercial  objects,  for 
which  municipal  corporations  are  established.  The 
field  is  naturally  a  fertile  one  for  judicial  legislation 
and  construction,  and  it  has  been  fully  developed  by 
our  courts  in  giving  effect  to  the  powers  necessary  to 
a  full  enjoyment  and  a  complete  realization  of  the 
advantages  of  such  corporations,  to  the  end  that  the 
greatest  public  good  might  be  attained.  Decisions 
giving  the  most  complete  freedom  of  activity  to 
municipalities,  consistent  with  their  best  interests  and 
not  derogatory  of  specific  statutory  regulations,  repre- 
sent the  great  weight  of  authority.  It  is  only  a  few 
of  our  courts  that  refuse  the  right  of  municipal  cor- 
porations to  keep  abreast  of  the  times  and  to  conduct 
their  affairs  to  their  best  advantage  and  for  the  great- 
est benefit  of  their  citizens. 

§  30.  Best  interests  of  municipality  the  test. — 
In  view  of  the  fact  that  practically  the  sole  purpose  of 
such  corporations  in  their  capacity  as  business  con- 
cerns is  to  benefit  the  people  who  inhabit  them  and 
thus  constitute  their  stockholders,  so  to  speak,  it  is 
submitted  that  the  present  advantage  of  their  citi- 
zens   and   the   prospective    advancement    of   these    or- 


6l  IMPLIED    POWERS.  §  3I 

ganizations  should  be  the  test  of  the  control  exercised 
over  them  by  the  legislature  and  the  courts.  The  only- 
other  party  even  remotely  concerned  is  that  of  the 
state  and  its  interests  in  such  matters  are  identical 
with  those  of  the  city.  Since  the  interests  of  the  two 
parties  involved  is  the  same  it  is  only  reasonable  to 
suppose  that  the  one  party,  in  legislating  for  the 
other,  intends  always  to  accomplish  the  greatest  good 
for  the  greatest  number  concerned. 

§31.  Only  general  powers  expressly  given  by 
statute. — Because  of  the  many  details  in  administra- 
tion and  the  varying  circumstances  and  changing  con- 
ditions of  the  different  cities,  only  general  legislation 
with  reference  to  them  is  advisable  or  possible.  This 
necessitates  the  exercise  of  much  judgment  and  of 
many  implied  powers  by  the  cities,  in  whose  officers 
must  be  vested  a  wide  discretion.  And  in  construing 
such  general  statutes  in  a  particular  case  regard  must 
be  had  for  the  facts  and  circumstances  of  the  case  in 
hand  so  that  the  general  law  as  applied  will  give  the 
best  results.  It  is  in  determining  the  legislative  in- 
tent and  in  giving  such  intention  the  most  favorable 
practical  application  to  the  particular  city  of  which  it 
will  admit,  that  the  courts  take  the  opportunity  to 
advance  the  interests  by  extending  the  scope  of  the 
activity  of  such  municipality  as  its  welfare  requires. 
And  it  is  submitted  that  for  these  practical  reasons 
the  authorities  with  very  few  exceptions  favor  a  de- 
cided increase  of  the  sphere  of  municipal  activity 
because  the  best  interests  of  these  corporations  de- 
mand it. 

§  32.  Statutory  power  to  provide  municipal  public 
utilities  constitutional. — In  addition  to  the  powers, 
found  in  municipal  corporations  under  the  construction 


§  33  PUBLIC   UTILITIES.  62 

of  the  term  "municipal  purpose"  as  used  in  our  con- 
stitutions, to  own  and  operate  or  provide  themselves 
with  municipal  public  utilities,  which  has  already  been 
discussed,  statutes  expressly  providing  that  munici- 
palities may  furnish  such  public  utilities  as  electric 
light,  water  and  gas  for  the  private  use  of  their  citizens 
and  themselves  are  universally  upheld  by  all  our  courts 
as  constitutional.^ 

§  33.  Electric  light  plant. — In  the  case  of  Linn  v. 
Chambersburg,  i6o  Pa.  511,  28  Atl.  842,  25  L.  R.  A. 
217,  decided  in  1894,  the  court  says:  "The  power  of 
the  legislature  to  authorize  municipal  corporations  to 
supply  gas  and  water  for  municipal  purposes,  and  for 
the  use  and  benefit  of  such  of  their  inhabitants  as 
wish  to  use  them  and  are  willing  to  pay  therefor  at 
reasonable  rates,  has  never  been  seriously  questioned. 
In  view  of  the  fact  that  electricity  is  so  rapidly  com- 
ing into  general  use  for  illuminating  streets,  pubHc 
and  private  buildings,  dwellings,  etc.,  why  should  there 
be  any  doubt  as  to  the  power  to  authorize  such  cor- 
porations to  manufacture  and  supply  it  in  like  manner 
as  artificial  gas  has  been  manufactured  and  supplied? 

1  CONNECTICUT.— Norwich  Gas  &  Electric  Co.  v.  Norwich,  76 
Conn.  565,  57  Atl.  746. 

FEDERAL.— Andrews  v.  Nat.  Foundry  &  Pipe  Works,  61  Fed. 
782;  Fellows  v.  Walker,  39  Fed.  651. 

MASSACHUSETTS.— Citizens'  Gaslight  Co.  v.  Wakefield,  161 
Mass.  432,  37  N.  E.  444,  31  L.  R.  A.  457;  Opinion  of  the  Justices,  150 
Mass.  592,  24  N.  E.  1084,  8  L.  R.  A.  487. 

MICHIGAN.— Mitchell  v.  Negauhee,  113  Mich.  359,  71  N.  W.  646, 
38  L.  R.  A.  157,  67  Am.  St.  468. 

MISSISSIPPI.— Love  v.  Homes,  91  Miss.  535,  44  So.  835. 

OHIO.— Cincinnati  v.  Taft,  63  Ohio  St.  141,  58  N.  E.  63;  State 
€X  rel.  V.  Toledo,  48  Ohio  St.  112,  26  N.  E.  1061,  11  L.  R.  A.  729; 
Walker  v.  Cincinnati,  21  Ohio  St.  14,  8  Am.  Rep.  24. 

PENNSYLVANIA.— Lehigh  Water  Co.'s  Appeal,  102  Pa.  515,  121 
U.  S.  388,  30  L.  ed.  1059;  Linn  v.  Chambersburg,  160  Pa.  511,  2S 
Atl.  842,  25  L.  R.  A.  217. 


63  IMPLIED    POWERS.  §  34 

It  is  a  mistake  to  assume  that  municipal  corporations 
should  not  keep  abreast  with  the  progress  and  im- 
provements of  the  age." 

§  34.  Steam  railroad  the  exception. — The  case  of 
Walker  v.  Cincinnati,  21  Ohio  St.  14,  8  Am.  Rep.  24, 
decided  in  1871,  in  sustaining  as  constitutional  and 
upholding  in  all  respects  a  statute  expressly  giving 
authority  to  a  certain  class  of  municipal  corporations 
including  the  city  of  Cincinnati,  to  own  and  operate 
a  railroad,  furnishes  a  striking  and  unusual  illustration 
of  the  extent  of  the  powers  of  municipalities  when 
expressly  conferred  by  statute.  Acting  under  such 
authority  the  city  of  Cincinnati  was  permitted  to  build, 
maintain  and  operate  a  steam  railway  known  as  the 
Cincinnati  Southern  Railway,  which  extended  for 
many  miles  out  of  the  city  of  Cincinnati.  The  case  is 
unique,  however,  in  sustaining  the  power  of  the  mu- 
nicipal corporation  to  own,  maintain  and  operate  a 
steam  railway  extending  for  many  miles  beyond  the 
city  in  question;  and  while  the  case  has  failed  to  receive 
the  approval  of  other  decisions  referring  to  it,  the 
case  of  Cincinnati  v.  Taft,  63  Ohio  St.  141,  58  N.  E. 
63,  decided  in  1900,  indicates  that  the  decision  remains 
the  law  of  that  case  although  the  courts  have  refused 
to  extend  its  application  or  to  follow  it  in  other  sim- 
ilar proposed  undertakings. 

§  35.  Three  grounds  for  doctrine  of  implied  pow- 
ers.— Under  the  doctrine  of  the  implied  powers  of 
municipal  corporations  the  decisions  extending  their 
sphere  of  activity  are  based  on  one  of  three  grounds. 
The  first  which  is  probably  the  most  frequently  in- 
voked is  that  of  the  police  power,  whose  application 
in  this  connection,  as  well  as  in  others,  is  an  excellent 
illustration    of    the    pertinent    remark    by    one    of    our 


§  36  PUBLIC    UTILITIES.  64 

courts  that,  "it  may  be  said  that  it  is  known  when  and 
where  it  [the  poHce  power]  begins,  but  not  when  and 
where  it  terminates."^ 

Another  basis  for  these  decisions  which  has  been 
frequently  given  is  that  of  the  general  welfare  clause 
found  in  many  city  charters.  This  is  often  mentioned 
in  connection  with  the  third  reason  with  which  it  is 
closely  allied — that  the  purpose  is  public  or  municipal. 

§36.  The  police  power;  the  general  welfare;  mu- 
nicipal purpose. — All  three  of  these  are  sound  reasons 
for  the  decisions  of  our  courts,  recognizing  in  munici- 
pal corporations  additional  powers  to  those  expressly 
granted  on  the  theory  that  they  are  entitled  to  exer- 
cise powers  "necessarily  or  fairly  implied  in  or  inci- 
dent to  powers  expressly  granted,  or  those  essential 
to  the  declared  objects  and  purposes  of  the  corpora- 
tion." It  may  seem  that  the  police  power  is  the  least 
germane  and  definite  because  of  its  elasticity  and  of 
the  very  wide  application  which  it  is  given  as  the  rea- 
son for  some  decisions  upon  almost  all  subjects.  It 
is,  however,  a  valid  basis  for  these  decisions,  for  the 
furnishing  of  water,  light,  gas,  and  such  public  utilities 
to  the  individual  inhabitants  of  cities  concerns  the 
protection  of  their  health,  life  and  property,  which 
constitutes  a  duty  of  the  municipality  to  its  citizens. 
But  naturally  the  general  welfare  clause  of  the  charter 
or  the  fact  that  the  purpose  is  a  necessary  or  munici- 
pal one  furnishes  a  basis  for  this  line  of  decisions  that 
is  more  peculiarly  applicable  than  that  of  the  police 
power. ^ 

§  37.  Increase  of  sphere  of  municipal  activity. — 
Further    the    power    of    the    municipality    to    provide 

2  Champer  v.  Greencastle,  138  Ind.  339,  35  N.  E.  14,  24  L.  R.  A. 
768,  46  Am.  St.  390. 

3  Dillon  Mun.   Corp.,  §§  1293  et  seq.   and  cases  cited. 


65  IMPLIED    POWERS.  §  38 

these  public  utilities  for  the  private  use  of  its  citizens 
is  implied  from  the  power  to  furnish  such  utilities  for 
use  upon  its  streets  and  in  other  public  places  in  the 
absence  of  any  express  legislative  authority  by  most 
of  our  courts.  There  are  a  few  decisions  it  is  true 
which  refuse  the  city  the  right  so  to  extend  its  sphere 
of  activity  and  usefulness  for  the  advantage  of  its 
citizens.  The  great  weight  of  authority,  however, 
and  certainly  the  better  reason  permits  this  extension 
of  power  and  favors  an  increase  of  the  sphere  of 
municipal  activity. 

§  38.  Power  and  duty  to  provide  municipal  public 
utilities. — The  rule  of  law  is  well  established  to  the 
effect  that  a  city,  in  erecting  gas,  water  or  electric  light 
plants,  is  not  limited  to  providing  the  service  of  such 
utilities  for  use  only  upon  the  streets  and  in  other 
public  places  of  the  city,  but  that  it  may  in  connection 
therewith  furnish  the  same  for  the  private  use  of  its 
citizens.  Some  of  our  courts  have  even  held  that  it 
is  the  duty  of  the  municipality  not  only  to  light  its 
streets  and  public  places,  but  to  furnish  its  inhabitants 
with  the  means  of  obtaining  light  at  their  own  ex- 
pense.* 

In  the  case  of  Covington  Gaslight  Co.  v.  Coving- 
ton, 22  Ky.  L.  796,  58  S.  W.  805,  decided  in  1900,  the 
court  says:  "It  seems  to  us  that,  under  these  pro- 
visions in  appellee's  charter,  it  was  not  only  its  right, 
but  it  was  its  pkin  duty,  to  provide  for  the  lighting 
of  the  streets,  public  places,  and  buildings,  and  to  fur- 

*  Newport  v.  Newport  Light  Co.,  S4  Ky.  166,  8  Ky.  L.  22,  21  S. 
W.  645;  Covington  Gaslight  Co.  v.  Covington.  22  Ky.  L.  796,  58 
S.  W.  805;  Springville  v.  Fullmer,  7  Utah  450,  27  Pac.  577;  Andrews 
V.  National  Foundry  &  Pipe  Works,  61  Fed.  782. 

5— Pub.  Ut. 


§  39  PUBLIC    UTILITIES.  66 

nish  light  to  the  citizens  of  the  community  in  the  best, 
cheapest  and  most  approved  manner." 

The  duty  of  the  municipal  corporation  to  furnish 
the  conveniences  of  municipal  public  utilities  is  ex- 
pressed by  the  court  in  the  case  of  Springville  v.  Full- 
mer, 7  Utah  450,  27  Pac.  577,  decided  in  1891,  as  fol- 
lov^s:  "And  having  the  power  it  was  the  duty  of  the 
plaintiff  to  use  it  so  far  as  the  health,  safety,  con- 
venience and  good  of  its  inhabitants  demanded." 

In  view  of  some  diversity  of  opinion  of  the  courts 
and  the  recent  date  of  the  decisions  which  make  it 
impossible  to  speak  of  the  doctrine  defining  the  limits 
of  this  principle  as  finally  accepted  by  all  our  courts, 
it  has  been  thought  best  to  set  out  somewhat  at  length 
some  of  the  decisions  together  with  the  grounds  upon 
which  they  are  based  to  show  the  authority  for  the 
position  taken  by  our  courts  favoring  an  increase  of 
the  sphere  of  municipal  activity.^ 

§  39.  Electric  light  plant  by  virtue  of  police  power. 
• — ^The  case  of  Crawfordsville  v.  Braden,  130  Ind.  149, 
28  N.  E.  849,  14  L.  R.  A.  268,  38  Am.  St.  214,  decided 
in  1891,  is  a  leading  one  and  has  been  frequently 
cited  with  approval.  The  court  states  the  question  for 
decision  as  follows:     "Has  a  municipal  corporation  in 

5  CALIFORNIA.— Gary  v.  Blodgett,  10  Cal.  App.  463,  102  Pac. 
668;  McBean  v.  Fresno,  112  Cal.  159,  44  Pac.  358,  31  L.  R.  A.  794,  53 
Am.  St.  191;  Egan  v.  City  and  County  of  San  Francisco  (Cal.),  133 
Pac.   294. 

GEORGIA.— Holton  v.  Camilla,  134  Ga.  560,  68  S.  E.  472,  31  L. 
R.  A.  (N.  S.)  116,  20  Am.  &  Eng.  Ann.  Cas.  199. 

INDIANA.— Crawfordsville  v.  Braden,  130  Ind.  149,  28  N.  E.  849, 
14  L.  R.  A.  268,  30  Am.  St.  214;  Rushville  Gas  Co.  v.  Rushville, 
121  Ind.  226,  23  N.  E.  72,  6  L.  R.  A.  315,  16  Am.  St.  388. 

KENTUCKY.— Overall  v.  Madisonville,  125  Ky.  684,  102  S.  W. 
278,  12  L.  R.  A.  (N.  S.)  433. 

WISCONSIN.— Eau  Claire  Water  Co.  v.  Eau  Claire,  127  Wis.  154, 
106  N.  W.  679,  112  N.  W.  458;  Ellinwood  v.  Reedsburg,  91  Wis.  131, 
64  N.  W.  88& 


6y  IMPLIED    POWERS.  §  39 

this  state  the  power  to  erect,  maintain,  and  operate 
the  necessary  buildings,  machinery  and  appliances  to 
light  its  streets,  alleys  and  other  public  places  with 
the  electric  light,  and  at  the  same  time  and  in  con- 
nection therewith  to  supply  electricity  to  its  inhabi- 
tants for  the  lighting  of  their  residences  and  places  of 
business?"  The  only  statutory  authority  in  point  pro- 
vided: "That  the  common  council  of  any  city  in  this 
state  incorporated  either  under  the  general  act  for 
the  incorporation  of  cities  or  under  a  special  charter, 
and  the  board  of  trustees  of  all  incorporated  towns  of 
this  state,  shall  have  the  power  to  light  the  streets, 
alleys,  and  other  public  places  of  such  city  and  town 
with  the  electric  light,  or  other  form  of  light,  and  to 
contract  with  any  individual  or  corporation  for  light- 
ing such  streets,  alleys,  and  other  public  places  with 
the  electric  light,  or  other  forms  of  light,  on  such 
terms,  and  for  such  time,  not  exceeding  ten  years  as 
may  be  agreed  upon."* 

In  holding  that  the  city  might  furnish  electricity 
to  its  inhabitants  the  court  said:  "Among  the  implied 
powers  possessed  by  municipal  corporations  is  the 
power  to  enact  and  enforce  reasonable  by-laws  and 
ordinances  for  the  protection  of  health,  life  and  prop- 
erty. .  .  .  The  corporation  possessing,  as  it  does, 
the  power  to  generate  and  distribute  through  its  lim- 
its, electricity  for  the  lighting  of  its  streets  and  other 
public  places,  we  can  see  no  good  reason  why  it  may 
not  also,  at  the  same  time,  furnish  it  to  the  inhabitants 
to  light  their  residences  and  places  of  business.  To 
do  so,  is  in  our  opinion,  a  legitimate  exercise  of  the 
police  power  for  the  preservation  of  property  and 
health.  It  is  averred  in  the  complaint  that  the  light 
which  the  city  proposes  to  furnish  for  individual  use 
is   the   incandescent   light.      Here    again   is    a    fact    of 

«Act3  of  Indiana,  1883,  p.  85. 


§  40  PUBLIC    UTILITIES.  68 

which  we  are  authorized  to  take  judicial  knowledge. 
A  light  thus  produced  is  safer  to  property,  and  more 
conducive  to  health  than  the  ordinary  light.  Pro- 
duced by  the  heating  of  a  filament  of  carbon  to  the 
point  of  incandescence  in  a  vacuum,  there  is  nothing 
to  set  property  on  fire,  or  to  consume  the  oxygen 
in  the  surrounding  air,  and  thus  render  it  less  capable 
of  sustaining  life  and  preserving  health."  The  court 
reached  its  decision  notwithstanding  the  existence  of 
a  provision  in  the  statutes  authorizing  the  grant  to 
any  corporation  of  the  right  to  erect  and  maintain  in 
the  streets  the  necessary  poles  and  appliances  for  the 
purpose  of  supplying  the  electric  or  other  light  to  the 
inhabitants. 

This  decision  is  the  leading  one  on  the  subject  that 
is  expressly  put  on  the  ground  of  the  police  power, 
and  the  reasoning  of  the  court  in  doing  so  has  met 
somewhat  ingenious  and  novel  when  made,  is  now 
with  approval  by  all  the  decisions  which  accept  the 
doctrine  of  implied  powers  in  this  connection.  The 
argument  of  the  court  is  convincing,  and  although 
well  recognized  and  has  been  advanced  in  later  cases 
following  this  decision.  It  will  also  be  noted  that 
these  cases  are  concerned  with  electric  lighting  which 
is  not  so  essentially  a  matter  of  public  health  as  the 
furnishing  of  a  water  supply  or  a  sewerage  system, 
and  which  is  of  course  a  more  modern  public  utility. 

§  40.     Sewer  system  provided  under  police  power. 

— The  police  power  serves  as  a  more  natural  support 
to  the  decision  of  the  case  of  McBean  v.  Fresno,  112 
Cal.  159,  44  Pac.  358,  31  L.  R.  A.  794,  53  Am.  St.  191, 
where  the  action  was  to  recover  the  contract  price  for 
services  rendered  in  disposing  of  sewage  for  the  de- 
fendant city.  The  court  said  in  the  course  of  its 
decision  that,  "proper  sewers  are  in  this  day  so  essen- 


69  IMPLIED    POWERS.  §  4I 

tial  to  the  hygiene  and  sanitation  of  a  municipality 
that  a  court  would  not  look  to  see  whether  a  power  to 
construct  and  maintain  them  had  been  granted  by  the 
charter,  but  rather  only  to  see  whether,  by  possibility, 
the  power  had  been  expressly  denied." 

§  41.  Water-works  and  electric  lighting. — And  to 
the  same  effect  is  Ellinwood  v.  Reedsburg,  91  Wis.  131, 
64  N.  W.  885,  where  the  court  says:  "It  is  not  neces- 
sary to  seek  for  an  express  delegation  of  power  to 
the  city  to  build  a  water-works  and  electric  lighting 
plant  in  order  to  determine  whether  such  power  exists, 
for  the  general  power  in  respect  to  police  regulations, 
the  preservation  of  the  public  health,  and  the  general 
welfare  includes  the  power  to  use  the  usual  means  of 
carrying  out  such  powers,  which  includes  municipal 
water  and  lighting  services." 

The  case  of  Overall  v.  Madisonville,  125  Ky.  684, 
IC2  S.  W.  278,  12  L.  R.  A.  (N.  S.)  433,  decided  in  1907, 
furnishes  a  quaint  historical  statement  and  illustration 
of  the  power  of  municipal  corporations  to  provide 
themselves  with  the  conveniences  of  municipal  public 
utilities  and  shows  that  such  power  has  practically 
always  been  regarded  as  belonging  to  such  corpora- 
tions. In  the  course  of  its  decision  the  court  says: 
"Public  ownership  of  public  utilities  has  been  a  politi- 
cal as  well  as  a  legal  question  for  quite  a  while.  It 
seems  to  have  been  a  political  question  long  before  its 
legality  was  doubted.  We  read  that  Hezekiah,  king 
of  Judea,  established  and  maintained  by  public  au- 
thority a  city  water-works  plant  in  the  city  of  David. 
2  Kings,  c.  20,  verse  20.  And  who  has  not  heard  of 
the  public  baths  of  ancient  Rome?  The  public  lighting 
of  the  streets  of  cities  is  of  modern  origin  yet  the 
necessity  for  lighting  in  a  city  is  scarcely  less  now  than 
its  necessity  for  water.     ...     A  good  light  is  the 


§  42  PUBLIC    UTILITIES.  7O 

equivalent  of  a  good  policeman  in  preventing  certain 
forms  of  crime.  It  is  therefore  universally  held  now 
that  it  is  clearly  within  the  police  power  of  cities,  even 
without  express  authority,  to  provide  public  lighting 
of  their  streets  at  the  public  expense." 

§  42.  The  general  welfare  clause  of  municipal 
charters. — The  promptness  with  which  our  courts  ex- 
tended the  power  of  municipalities  to  include  the 
employment  of  the  modern  agency  of  electricity  for 
private  purposes,  after  the  advantages  of  using  it  for 
public  lighting  had  been  demonstrated,  is  the  best 
evidence  that  they  desire  to  extend  the  sphere  of 
usefulness  of  our  cities  whenever  the  opportunity  is 
given.  The  courts  are  of  the  opinion  that  it  is  not 
only  within  the  power  of  the  cities  but  that  it  is  their 
duty  to  keep  themselves  free  to  accept  for  their  own 
use  and  to  provide  for  their  inhabitants  new  inventions 
and  superior  agencies  as  they  arise,  and  that  cities 
are  not  to  be  restricted  to  the  providing  for  the  strict 
necessities  of  their  citizens  but  that  they  may  also 
minister  to  their  comfort  and  pleasure.  The  courts 
have  not  hesitated  to  find  power  by  implication  in  the 
municipality  to  furnish  its  inhabitants  with  electric 
light  and  other  such  public  utilities  not  only  on  the 
ground  of  the  police  power,  as  we  have  just  seen,  but 
for  the  reason  that  to  do  so  is  properly  included  in  the 
general  welfare  clause  commonly  found  in  municipal 
charters  or  for  the  reason  that  the  purpose  is  public 
or  one  of  necessity.'^ 

7  COLORADO.— Denver  v.  Hallett,  34  Colo.  393,  83  Pac.  1066. 

DAKOTA.— National  Tube  Works  v.  Chamberlain,  5  Dak.  54, 
37  N.  W.  761. 

FEDERAL.— Thomson-Houston  Electric  Co.  v.  Newton,  42 
Fed.  723. 

GEORGIA.— Heilbron   v.    Cuthbert,    96   Ga.    312,   23    S.    E.    206; 


71  IMPLIED    POWERS.  §  43 

§  43.  Rapid  transit  systems  as  modern  conveni- 
ences.— In  the  case  of  Sun  Printing  &  Publishing  Assn. 
V.  New  York,  8  App.  Div.  (N.  Y.)  230,  152  N.  Y.  257, 
46  N.  E.  499,  37  L.  R.  A.  788,  decided  in  1897,  the 
court,  in  answering  the  question  in  the  affirmative 
whether  a  rapid  transit  railroad  wholly  within  the 
limits  of  the  city  is  a  city  purpose,  said:  "That  cities 
are  not  limited  to  providing  for  the  strict  necessities 
of  their  citizens.  Under  legislative  authority  they  may 
minister  to  their  comfort,  health,  pleasure  or  educa- 
tion. ...  To  hold  that  the  legislature  of  this 
state,  acting  as  the  parens  patriae,  may  employ  for 
the  relief  or  welfare  of  the  inhabitants  of  the  cities  of 
the  state  only  those  methods  and  agencies  which  have 
proved  adequate  in  the  past  would  be  a  narrow  and 
dangerous  interpretation  to  put  upon  the  fundamental 

Holton  V.  Camilla,  134  Ga.  560,  68  S.  E.  472,  31  L.  R.  A.  (N.  S.)  116, 
20  Am.  &  Eng.  Ann.  Cas.  199;  Rome  v.  Cabot,  28  Ga.  50. 

ILLINOIS.— Fox  V.  Kendall,  97  111.  72;  Warren  v.  Chicago,  118 
111.  329,  11  N.  E.  218. 

KANSAS.— State  v.  Lawrence,  79  Kas.  234,  100  Pac.  485. 

MASSACHUSETTS.— Lawrence  v.  Meltmen,  166  Mass.  206,  44 
N.  E.  247. 

MICHIGAN.— Belding  Improvement  Co.  v.  Belding,  128  Mich. 
79,  87  N.  W.  113. 

NORTH  CAROLINA.— Fawcett  v.  Mt.  Airy,  134  N.  Car.  125,  45  S. 
E.  1029,  63  L.  R.  A.  870,  101  Am.  St.  825;  Greensboro  v.  Scott,  138  N. 
Car.  181,  50  S.  E.  589;  Henderson  Water  Co.  v.  Henderson  P. 
Schools,  151  N.  Car.  171,  65  S.  E.  927.;  Wadsworth  v.  Concord,  133 
N.  Car.  587,  45  S.  E.  948. 

NEW  YORK.— Admiral  Realty  Co.  v.  New  York,  206  N.  Y.  110, 
99  N.  E.  241;  Pullman  v.  New  York,  54  Barb.  169;  Sun  Printing  & 
Publishing  Assn.  v.  New  York,  8  App.  Div.  230,  152  N.  Y.  257,  46 
N.  E.  499,  37  L.  R.  A.  788. 

OHIO.— Alter  v.  Cincinnati,  56  Ohio  St.  47,  46  N.  E.  69. 

OKLAHOMA.— Barnes  v.  Hill,  23  Okla.  207,  99  Pac.  927. 

TENNESSEE.— Smith  v.  Nashville,  88  Tenn.  464,  12  S.  W.  924, 
7  L.  R.  A.  469. 

WISCONSIN.— Bell  v.  Plattville,  71  Wis.  139,  36  N.  W.  831. 


§  43  PUBLIC    UTILITIES.  ^2 

law.  No  such  interpretation  has  thus  far  been  placed 
upon  the  organic  law  by  the  courts  of  this  state." 

In  sustaining  the  decision  of  this  case  and  in  up- 
holding the  power  of  the  city  not  only  to  build,  main- 
tain and  operate  or  lease  a  rapid  transit  system  in  the 
city  of  New  York,  but  in  holding  that  such  city  had  the 
power  to  lease  its  subway  to  be  operated  in  connec- 
tion with  a  privately  owned  system  for  the  purpose  of 
securing  more  convenient  service  by  a  more  compre- 
hensive transfer  system,  the  court  in  Admiral  Realty 
Co.  V.  New  York,  206  N.  Y.  no,  99  N.  E.  241,  de- 
cided June  29,  1912,  said:  "The  question  is  whether 
the  municipality,  instead  of  building  subways  at  an 
enormous  expense  over  the  entire  territory,  may  build 
them  in  part  of  it  and  then  make  a  contract  for  their 
operation  with  the  owner  of  the  privately  owned 
system,  under  which  the  latter  agrees  to  operate  its 
system  in  conjunction  with  the  subways,  and  subject 
to  a  single  fare.  It  seems  to  me  that  it  may  thus  do; 
and  that  the  statement  of  the  proposition  very  largely 
supplies  the  argument  in  its  favor." 

The  decision  in  the  case  of  Heilbron  v.  Cuthbert, 
96  Ga.  312,  23  S.  E.  206,  rendered  in  1895,  is  placed 
expressly  on  the  general  welfare  clause  of  the  charter. 
The  court  finds  that:  "Under  the  9th  section  of  the 
charter  of  the  city  of  Cuthbert  [Acts  of  1859,  Georgia, 
p.  149]  the  mayor  and  council  of  that  city  have  au- 
thority to  'contract  and  be  contracted  with;  sue  and 
be  sued;  .  .  .  and  do  all  things  for  the  benefit 
of  the  city,  and  all  things  not  in  violation  of  the  con- 
stitution and  laws  of  this  state.'  It  is  apparent,  there- 
fore, that  the  'general  welfare  clause'  in  this  charter 
is  very  broad  and  liberal  in  its  terms.  That  the  erec- 
tion and  maintenance  of  water-works  and  of  an  electric 
light  plant  would  result  in  benefit  to  the  city,  is  ob- 
vious.    It    was    insisted,    however,    that    in    order    to  I'l 


73  IMPLIED    POWERS.  §  44 

authorize  a  municipal  corporation  to  contract  a  debt 
for  improvements  of  this  kind,  the  power  to  do  so 
must  be  expressly  conferred  by  the  charter.  We 
do  not  concur  in  this  view."  While  there  is  no  ex- 
press statement  made  in  this  case  to  the  effect  that 
the  inhabitants  as  well  as  the  city  were  to  be  sup- 
plied with  water  and  electricity,  this  would  seem  to 
have  been  intended,  from  a  remark  found  in  connec- 
tion with  the  statements  of  the  facts  of  the  case 
that,  "this  ordinance  further  provides  that  all  rev- 
enue arising  from  the  operation  of  the  water-works 
and  light  plant  should  be  applied  first  to  the  expense 
of   their   operation,   etc." 

§  44.  Modern  municipal  public  utilities  practi- 
cal necessities. — Among  the  more  recent  cases  per- 
mitting cities  to  provide  their  citizens  with  electric 
light  in  their  private  capacity  in  the  absence  of  any 
express  legislative  authority  is  that  of  Fawcett  v. 
Mt.  Airy,  134  N.  Car.  125,  45  S.  E.  1029,  63  L.  R.  A. 
870,  loi  Am.  St.  825,  decided  in  1903.  This  case  ar- 
gues the  question  in  issue  at  length,  and  indicates  the 
favorable  attitude  which  is  taken  toward  increasing  the 
opportunities  for  cities  to  serve  their  citizens  with 
the  comforts  and  pleasures  as  well  as  the  necessities 
of  life.  It  also  shows  that  our  courts  recognize  the 
fact  that  with  the  advance  of  civilization,  the  increase 
of  population  and  its  congestion  in  municipalities, 
making  competition  more  keen  and  living  conditions 
more  strenuous,  what  were  at  one  time  regarded  as 
luxuries  become  comforts  and  are  later  looked  upon 
as  necessities.  The  case  also  criticises  the  decision 
of  the  Massachusetts  court  in  the  case  of  Spaulding 
v.  Peabody,  153  Mass.  129,  26  N.  E.  421,  10  L.  R. 
A.  397,  for  refusing  to  imply  this  power  in  munici- 
palities   to    provide    their    citizens    with    these    public 


§  44  PUBLIC    UTILITIES.  74 

Utilities  although  it  had  held  the  purchase  of  town 
clocks,  scales,  etc.,  to  be  a  necessary  expense.  Be- 
cause of  its  importance,  we  quote  from  the  decision 
at  length.  "Whether  a  city  or  town  has  the  right 
to  incur  an  indebtedness  for  the  erection  and  operation 
of  plants  for  the  supply  of  water  and  electric  light 
for  municipal  use,  and  to  sell  to  its  inhabitants,  as 
a  necessary  municipal  expense,  is  the  question  again 
presented  to  us  for  decision.  Indebtedness  incurred 
by  a  city  or  town  for  a  supply  of  water  stands  on  the 
same  footing  as  indebtedness  incurred  for  lighting 
purposes,  and  if  such  indebtedness  be  a  necessary  ex- 
pense, then  whether  or  not  a  municipality  may  incur 
it  does  not  depend  upon  the  approval  of  the  propo- 
sition by  a  majority  of  the  qualified  voters  of  the 
municipality.  ...  It  is  almost  impossible  to  de- 
fine, in  legal  phraseology,  the  meaning  of  the  words 
'necessary  expense,'  as  applied  to  the  wants  of  a  city 
or  town  government.  A  precise  line  can  not  be  drawn 
between  what  are  and  what  are  not  such  expenses. 
The  consequence  is  that,  as  municipalities  grow  in 
wealth  and  population,  as  civilization  advances  with 
the  habits  and  customs  of  necessary  changes,  the 
aid  of  the  courts  is  constantly  invoked  to  make  de- 
cisions on  this  subject.  In  the  nature  of  things  it 
could  not  be  otherwise;  and  it  is  not  to  be  expected, 
in  the  changed  conditions  which  occur  in  the  lives 
of  progressive  people,  that  things  deemed  unnecessary 
in  the  government  of  municipal  corporations  in  one 
age  should  be  so  considered  for  all  future  time.  In 
the  efforts  of  the  courts  to  check  extravagance  and  to 
prevent  corruption  in  the  government  of  towns  and 
cities,  the  judicial  branch  of  the  government  has 
probably  stood  by  former  decisions  from  too  conserv- 
ative a  standpoint,  and  thereby  obstructed  the  ad- 
vance  of  business   ideas   which   would  be   most   bene- 


75  IMPLIED    POWERS.  §  45 

ficial  if  put  into  operation;  and  this  conservatism 
of  the  courts,  outgrown  by  the  march  of  progress 
sometimes  appears  at  a  serious  disadvantage  .  .  . 
and  certainly  expenses  incurred  for  water  and  Hght 
are  more  necessary  than  those  for  a  market  house, 
clocks,  and  scales.  The  words  'necessary  expense,' 
then,  must  mean  such  expenses  as  are  or  may  be  in- 
curred in  the  establishing  and  procuring  of  those 
things  without  which  the  peace  and  order  of  the 
community,  its  moral  interests,  and  the  protection 
of  its  property  and  that  of  the  property  and  persons 
of  its  inhabitants,  would  seriously  suffer  considerable 
damage.  ...  If  the  matter  of  lighting  is  a 
necessary  expense,  then  how  and  in  what  manner 
the  city  shall  furnish  such  lighting  is  with  the  author- 
ities of  the  city  or  town  to  determine.  .  .  .  Our 
conclusion,  then,  is  that  an  expense  incurred  by  a 
city  or  town  for  the  purpose  of  building  and  operating 
plants  to  furnish  water  and  lights  is  a  necessary 
expense." 

§  45.  Water-works  the  oldest  and  most  neces- 
sary utility. — The  provision  of  an  adequate  water 
supply  for  the  use  of  the  city  and  its  inhabitants  is 
directly  concerned  with  the  public  health  in  addition 
to  being  a  municipal  purpose  and  for  the  general 
welfare.  This  public  utility  has  always  been  recog- 
nized as  necessary  for  the  public  health  and  conven- 
ience, and  the  authorities  agree  that  the  municipality 
should  provide  a  water  supply  for  protection  against 
fire.  That  an  adequate  supply  of  pure  water  for 
the  citizens  of  a  large  city  is  a  necessity  which  can 
be  provided  only  by  a  responsible  public  or  quasi- 
public  corporation  is  generally  admitted.  As  com- 
pared with  electricity,  the  question  of  a  water  supply 
is  much  older  and  the  law,  permitting  cities  to  furn- 


§  45  PUBLIC    UTILITIES.  76 

ish  water  from  their  own  plant  to  their  citizens 
along  with  providing  for  the  public  wants,  has  be- 
come firmly  established.  In  practice  it  seems  to 
have  been  very  generally  assumed  that  the  erection 
and  operation  of  a  water-works  system  is  a  munici- 
pal purpose  and  that  the  city  is  expected  to  furnish 
it  for  private  use  along  with  attending  to  the  pub- 
lic demand.  The  courts  have  recognized  the  econ- 
omy of  doing  this  as  well  as  the  fact  that  it  tends 
to  the  protection  of  health,  life,  and  property,  and  is 
therefore  a  legitimate  exercise  of  the  police  power. 
A  good  case  expressing  the  law  of  this  subject  is 
that  of  Smith  v.  Nashville,  88  Tenn.  464,  12  S.  W. 
924,  7  L.  R.  A.  469,  where  the  only  statute  in  point 
gave  the  mayor  and  city  council  the  power  "to  pro- 
vide the  city  with  water  by  water-works,  within  or 
beyond  the  boundaries  of  the  city,  and  to  provide  for 
the  prevention  and  extinguishment  of  fires,  and  to 
organize  and  establish  fire  companies."  In  the  course 
of  its  well  reasoned  decision  the  court  says:  "It  is 
seen  at  once  that  the  water-works  are  corporate  prop- 
erty; that  is  not  denied.  The  debate  is  with  respect 
to  the  nature  of  the  use.  As  to  that,  for  the  sake  of 
convenience  we  divide  all  the  purposes  for  which  the 
city  furnishes  water  into  three  classes:  (i)  to  ex- 
tinguish fires  and  sprinkle  the  streets;  (2)  to  supply 
citizens  of  the  city;  (3)  to  supply  persons  and  fac- 
tories adjacent  to  but  beyond  the  corporate  limits. 
If  the  business  were  confined  to  the  first  class,  there 
would  be  no  ground  to  base  a  discussion  upon,  so 
clearly  would  the  use  be  exclusively  for  public  advan- 
tage. We  think  there  can  be  but  little  more  doubt 
about  the  second  class,  especially  in  view  of  certain 
words  in  the  city  charter,  to  which  we  will  advert 
presently.  Nothing  should  be  of  greater  concern  to 
a  municipal  corporation  than  the  preservation  of  the 


yj  IMPLIED    POWERS.  §  46 

good  health  of  the  inhabitants;  nothing  can  be  more 
conducive  to  that  end  than  a  regular  and  sufficient 
supply  of  wholesome  water,  which  common  observa- 
tion teaches  all  men  can  be  furnished,  in  a  populous 
city,  only  through  the  instrumentality  of  well  equip- 
ped water-works.  Hence  for  a  city  to  meet  such  a 
demand  is  to  perform  a  public  act  and  confer  a  public 
blessing.  It  is  not  a  strictly  governmental  or  munici- 
pal function,  which  every  municipality  is  under  legal 
obligation  to  assume  and  perform,  but  it  is  very  close 
akin  to  it,  and  should  always  be  recognized  as  within 
the  scope  of  its  authority,  unless  excluded  by  positive 
law.  Here  the  first  clause  [of  the  statute  quoted 
supra],  'to  provide  the  city  with  water  by  water- 
works' is  very  broad  and  comprehensive,  and  was 
obviously  intended  to  authorize  the  corporation  to 
furnish  the  inhabitants  of  the  city  with  water.  Having 
accepted  the  charter  and  undertaken  to  exercise  this 
authority  in  the  manner  detailed  by  the  witness,  it 
can  not  be  held  that  the  city,  in  doing  so,  is  engaging 
in  a  private  enterprise  or  performing  a  municipal  func- 
tion for  a  private  end." 

§  46.  Supply  of  municipal  public  utilities  for  pri- 
vate use. — These  authorities,  then,  \\\\\  serve  to  sup- 
port the  principle  so  far  as  it  is  based  on  the  doctrine 
of  implied  powers  that  our  courts,  for  one  or  more  of 
the  three  valid  reasons  above  given,  permit  municipal 
corporations  in  connection  with  supplying  their  public 
wants  for  gas,  water  and  electric  light  services  to  fur- 
nish these  utilities  for  the  private  use  of  their  inhabi- 
tants. This  privilege  is  found  by  implication,  it  is  to  be 
noted,  only  in  case  it  is  to  be  exercised  in  connection 
with  supplying  the  public  wants ;  and  while  most  of  our 
courts  do  not  expressly  give  as  a  reason  for  their  hold- 
ings the  economy  of  such  an  arrangement,  it  is  sub- 


§47 


PUBLIC    UTILITIES. 


78 


mitted  that  this  is  a  controlHng  idea  underlying  their 
decisions,  and  it  is  expressly  given  in  some  of  them. 

§  47.  Joint  public  and  private  service  more  eco- 
nomical.— In  the  case  of  Belding  Improvement  Co.  v. 
Belding,  128  Mich.  79,  87  N.  W.  113,  decided  in  1901, 
the  court  recognizes  the  practical  economy  of  per- 
mitting the  city  to  extend  the  service  of  public  utilities 
to  its  citizens  for  the  purpose  of  securing  revenue  with 
which  to  maintain  its  public  utility  plant  and  provide 
itself  with  such  conveniences;  nor  does  the  court  admit 
the  contention  made  that  to  find  such  power  to  render 
private  service  to  the  individual  citizen  by  implication 
is  either  unconstitutional  or  unauthorized  although  no 
authority  may  be  expressly  given.  In  its  decision  the 
court  says:  "It  is  also  contended  that  this  act  is 
unconstitutional,  because,  by  providing  that  cities  may 
do  commercial  lighting  when  they  erect  municipal 
plants,  it  is  made  broader  than  its  title.  We  think  that 
commercial  lighting  may  be  essential  to  make  a  mu- 
nicipal plant  self-sustaining,  and  that  a  provision  for 
it  might,  perhaps,  be  within  a  reasonable  construction 
of  such  a  title.  But  we  find  it  unnecessary  to  decide 
this  question,  for  the  reason  that  such  provision  might 
be  eliminated,  and  leave  a  valid  title." 


§  48.  Ice  from  municipal  water-works,  an  economy 
and  necessity. — The  case  of  Holton  v.  Camilla,  134 
Ga.  560,  68  S.  E.  472,  31  L.  R.  A.  (N.  S.)  116,  20  Am. 
&  Eng.  Ann.  Cas.  199,  decided  in  1910,  furnishes  an 
equally  clear  decision  of  progressive  judicial  interpre- 
tation of  the  powers  vested  in  municipal  corporations. 
The  decision  may  be  justified  by  its  practical  result 
in  securing  adequate  ice  service  which  is  so  essentially 
necessary,  under  the  particular  climatic  conditions,  to 
the   maintenance   of  the   health   of   the   individual   and 


79  IMPLIED    POWERS.  §  48 

good  general  sanitary  conditions  in  the  city.  In  per- 
mitting the  city  to  furnish  ice  to  the  inhabitants  in 
connection  with  the  operation  of  its  water-works  and 
electric  light  system  by  which  the  water  so  furnished 
would  be  rendered  palatable  and  healthful,  the  court 
seems  to  have  advanced  to  the  position  without  the 
support  of  any  authority  directly  in  point.  The  deci- 
sion permitting  the  city  to  furnish  ice  in  connection 
with  its  water-works  system  was  evidently  occasioned 
in  part  at  least  by  the  economy  of  such  an  arrange- 
ment as  well  as  the  argument  in  favor  of  its  being  in 
the  interest  of  the  health  and  sanitation  and  the  gen- 
eral comfort  of  the  citizens.  The  language  of  the 
decision  and  the  reasons  upon  which  it  is  based  are 
suflficiently  interesting  to  justify  the  following  ex- 
tract :  "If  a  city  has  the  right  to  furnish  heat  to  its 
inhabitants,  because  conducive  to  their  health,  comfort, 
and  convenience,  we  see  no  reason  why  they  should 
not  be  permitted  to  furnish  ice.  The  object  in  bring- 
ing, by  means  of  a  water-works  system,  water  in  pipes 
from  a  distance,  for  use  in  supplying  the  needs  of  a 
city,  is  not  alone  to  obtain  a  sufficient  quantity,  but 
also  to  secure  that  which  is  freer  from  impurities  than 
it  is  possible  to  obtain  in  the  city  itself.  If,  in  the  hot 
season  of  the  year,  the  inhabitants  of  the  city  must, 
for  sanitary  reasons,  relinquish  the  cool  draught  from 
the  well,  because,  as  has  been  demonstrated,  wells  of 
pure  water  can  not  be  maintained  in  populous  com- 
munities, surely  the  city  would  have  the  right,  were  it 
practicable,  to  cool  the  water  which  it  delivers  through 
pipes  as  a  substitute,  and  which  ofttimes  is  scarcely 
drinkable  in  its  heated  condition.  If  not  practicable 
to  cool  it  in  the  pipes,  and  if  it  be  necessary  to  the 
welfare,  comfort,  and  convenience  of  the  inhabitants 
that  its  temperature  be  lowered  before  being  used  for 
drinking  purposes,   why   can   not  the   city  provide   for 


§  49  PUBLIC    UTILITIES.  8o 

the  delivery  of  a  part  of  it  in  a  frozen  condition,  to  be 
used  in  cooling  such  part  of  the  balance  as  is  used  for 
drinking  purposes?  Is  the  difference  between  water  in 
a  liquid  and  in  a  frozen  condition  a  radical  one?  Upon 
what  principle  could  the  doctrine  rest  that  liquid 
water  may  be  dehvered  by  the  city  to  its  inhabitants 
by  flowage  through  pipes,  but  that  water  in  frozen 
blocks  can  not  be  delivered  by  wagons  or  otherwise? 
If  the  city  has  the  right  to  furnish  its  inhabitants  with 
water  in  a  liquid  form,  we  fail  to  see  any  reason  why 
it  can  not  furnish  it  to  them  in  a  frozen  condition. 
.  .  .  And  if  the  furnishing  of  ice  to  its  inhabitants 
is  conducive  generally  to  their  health,  comfort,  and 
convenience,  it  is  certainly  being  furnished  for  a  munic- 
ipal or  public  purpose.  .  .  .  Why,  then,  in  the  ex- 
ercise of  its  police  power,  may  not  a  city  guard  against 
impurities  in  the  ice  as  well  as  the  water  used  by  its 
inhabitants?"^ 

§  49.  Right  to  supply  private  service  by  implica- 
tion denied. — A  few  courts  take  issue  with  this  prin- 
ciple of  law  which  is  well  established  by  the  great 
weight  of  authority  and  hold  that,  while  the  power  to 
light  the  streets  and  public  places  of  a  city  by  elec- 
tricity authorizes  the  erection  and  maintenance  of  a 
plant  for  that  purpose,  it  may  not  be  used  for  supply- 
ing light  to  private  individuals.  These  adverse  deci- 
sions are  generally  confined  to  the  matter  of  fur- 
nishing electric  light,  which,  of  course,  is  compara- 
tively a  very  modern  public  utility,  and  some  of  them, 
at  least,  can  be  distinguished  from  those  already  dis- 

8  Quoting  Pond  on  Municipal  Control  of  Public  Utilities,  p.  28; 
1  Cooley  on  Taxation,  p.  217  and  10  Am.  &  Eng.  Enc.  Law,  2d  ed., 
p.  865. 


8 1  IMPLIED    POWERS.  §  50 

cussed  and  shown  not  to  be  actually  conflicting  au- 
thorities.' 

§  50.     Electric  light  service  one  of  most  modem. — 

One  of  the  leading  cases  which  is  apparently  opposed 
to  the  principle  in  question  is  that  of  Mauldin  v.  Green- 
ville, 33  S.  Car.  I,  II  S.  E.  434,  8  L.  R.  A.  291,  decided 
in  1890,  in  which  the  court  granted  an  injunction  pre- 
venting the  defendant  city  from  purchasing  and  oper- 
ating an  electric  light  plant,  so  far  as  it  was  con- 
cerned with  supplying  private  residences.  The  court 
admits  that  there  is  no  power  expressly  given  the  city 
to  provide  itself  with  light  for  public  purposes.  This 
decision,  therefore,  can  not  be  said  to  oppose  the  doc- 
trine that  where  a  city  has  the  power  expressly  given 
to  furnish  light  for  city  use  it  may  as  incidental  to 
such  use  and  in  connection  therewith  extend  the  ser- 
vice to  private  parties.  That  is  to  say,  in  this  case  the 
statute  fails  to  grant  power  in  the  city  to  furnish  light 
for  any  purpose  and  in  any  way,  so  that  the  court  is 

•  ALABAMA.— Posey  v.  North  Birmingham,  154  Ala.  511,  45  So. 
663,  15  L.  R.  A.   (U.  S.)  711. 

CALIFORNIA.— Gary  v.  Blodgett,  10  Cal.  App.  463,  102  Pac. 
668;  Clark  v.  Los  Angeles,  160  Cal.  30,  116  Pac.  722;  Hyatt  v.  Wil- 
liams, 14S  Cal.  585,  84  Pac.  41. 

ILLINOIS.— Blanchard  v.  Benton,  109  111.  App.  569;  Ladd  v. 
Jones,  61  111.  App.  584;  Palestine  v.  Slier,  225  111.  630,  80  N.  E.  345. 

KENTUCKY.— Dyer  v.  Newport,  123  Ky.  203,  29  Ky.  L.  656, 
94  S.  W.  25. 

MASSACHUSETTS.— Citizens'  Gaslight  Co.  v.  Wakefield,  161 
Mass.  432,  37  N.  E.  444,  31  L.  R.  A.  457;  Merrimack  River  Savings 
Bank  v.  Lowell,  152  Mass.  556,  25  N.  E.  469;  Opinion  of  the  Justi- 
ces, 150  Mass.  592,  24  N.  E.  1084,  8  L.  R.  A.  487;  Spaulding  v.  Lowell, 
23  Pick.  (Mass.)  71;  Spaulding  v.  Peabody,  153  Mass.  129,  26  N.  E. 
421,  10  L.  R.  A.  397. 

NEBRASKA.— Christensen  v.  Fremont,  45  Nebr.  160,  63  N.  W. 
364. 

NEW  JERSEY.— Howell  v.  Mlllville,  60  N.  J.  L.  95,  36  Atl.  691. 

SOUTH  CAROLINA.— Mauldin  v.  Greenville,  33  S.  Car.  1,  11  S. 
E.  434.  8  L.  R.  A.  291. 

6— Pub.  Ut. 


§  50  PUBLIC    UTILITIES.  '  82 

not   passing  on   the   question  under   discussion   in   the 
former  cases. 

In  this  case  the  court  expressed  itself  as  follows: 
"Clearly,  the  charter  does  not  give  the  power  to 
purchase  this  plant  in  express  words.  It  does  not  so 
give  even  the  power  to  light  the  city,  but  we  assume 
that  this  latter  power  may  be  fairly  implied  from  the 
grant  of  the  police  power.  .  .  .  This  seems  to  be 
a  new  question.  It  strikes  us  as  remarkable  that,  in 
the  multitude  of  cases  cited  by  the  distinguished  coun- 
sel who  argued  the  case,  there  should  not  be  in  one 
of  them  the  least  reference  to  this  precise  point.  We 
have  made  diligent  search,  and  have  not  been  able  to 
find  one.  We  must  decide  it,  but  without  any  help 
from  authorities.  The  city  has  the  express  power  to 
own  property,  and  it  also  has  the  implied  right  to  light 
the  city.  Do  these  powers  necessarily  imply  the  right 
to  make  the  city  the  owner  of  the  plant  and  a  manu- 
facturer of  electricity?  It  is  quite  certain  that  such 
power  is  not  'essential'  to  the  declared  objects  and 
purposes  of  the  corporation.  .  .  .  But  considering 
that  some  discretion,  as  to  the  mode  and  manner, 
should  be  allowed  the  municipality,  in  carrying  out 
the  conceded  power  to  light  the  streets  of  the  city, 
we  hold  that  the  purchase  of  the  plant  was  not  ultra 
vires  and  void,  so  far  as  it  was  designed  to  produce 
electricity  suitable  for  and  used  in  lighting  the  streets 
and  public  buildings  of  the  city.  But  we  can  not  so 
hold  as  to  the  purchase  of  so  much  of  that  plant  as 
furnished  the  incandescent  light  for  use  in  the  interior 
of  private  residences  and  places  of  business,  which 
can  not  be  properly  included  within  the  power  to  light 
the  streets  of  the  city.  ...  As  we  understand  it, 
all  the  powers  given  to  the  city  council  were  for  the 
sole  and  exclusive  purpose  of  government,  and  not  to 


83  IMPLIED    POWERS.  §  50 

enter  into  private  business  of  any  kind,  outside  of  the 
scope  of  the  city  government." 

This  case,  then,  in  refusing  the  right  of  the  city  to 
accommodate  its  citizens  v^^ith  modern  lighting  service 
for  their  private  use  was  confessedly  decided  without 
the  aid  of  authorities  and  at  most  involves  the  con- 
struction of  powers  existing  by  implication  only  to 
provide  for  public  lighting.  While  the  spirit  of  the 
case  is  hostile  it  can  not  be  said  to  be  an  authority  in 
conflict  with  the  line  of  decisions  above  discussed,  for 
they  involve  the  extension  of  the  authority  expressly 
given  the  city  to  provide  these  public  utilities  for  its 
own  wants,  and  together  therewith  those  of  its  citizens 
who  desire  to  avail  themselves  of  the  opportunity  and 
are  willing  to  pay  therefor.  It  is  further  submitted 
that  the  decision  is  not  sound  and  that  the  court  was 
in  error  in  saying  that  "all  the  powers  given  to  the 
city  council  were  for  the  sole  and  exclusive  purpose  of 
government."  There  can  be  no  question  under  the  law 
that  the  powers  of  municipalities  are  much  broader 
than  this,  as  common  observation  shows  must  be  the 
case  in  practice. 

In  referring  to  this  case  the  court  of  Nebraska  in 
Christensen  v.  Fremont,  45  Nebr.  160,  63  N.  W.  364, 
decided  in  1895,  said,  "that  while  the  power  to  light 
the  streets  authorize  the  erection  and  maintenance  of 
a  plant  for  lighting  the  streets,  it  does  not  authorize 
one  for  supplying  light  to  private  buildings."  The  court 
then  goes  on  to  admit  that  "the  act  of  1889  .  .  . 
extends  the  grant  of  power  to  the  purpose  in  ques- 
tion." saying:  "We  have,  thus,  elaborated  on  the 
grant  of  powers  because  the  conclusions  reached  con- 
vince us  that  in  the  absence  of  the  act  of  1889  the 
city  could  not  have  devoted  any  revenue  to  the  pur- 
pose of  maintaining  a  plant  to  furnish  light  for  private 
consumers."     This   case,   then,   is   not   an   authority   in 


§51  PUBLIC    UTILITIES.  84 

conflict  with  the  principle  under  discussion  for  the 
reason  that  the  decision  was  made  six  years  after  the 
passage  of  an  act  expressly  permitting  the  city  to 
serve  its  inhabitants  with  electric  light,  which  act  was 
recognized  by  the  decision  as  having  this  effect  on  the 
case.  These  expressions  of  the  court  on  the  subject 
are  mere  dicta,  having  no  force  of  law  whatever  and 
were  not  necessary  or  proper  in  the  decision,  for  they 
are  directly  contrary  to  what  the  court  admits  to  be 
the  law. 

§  51.  Detailed  statutory  provisions  of  Massachu- 
setts strictly  construed. — In  the  case  of  Spaulding  v. 
Peabody,  153  Mass.  129,  26  N.  E.  421,  10  L.  R.  A.  397, 
decided  in  1891,  the  court  denies  the  defendant  the 
right  to  furnish  light  to  its  inhabitants  in  the  absence 
of  any  express  statutory  power  in  connection  with 
supplying  the  streets  and  public  places  of  the  city. 
The  court  in  this  case  fails  to  follow  its  earlier  deci- 
sions holding  that  the  providing  of  clocks,  scales  and 
the  like  is  a  public  purpose  and  within  the  inherent 
power  of  cities.  It  can  hardly  be  successfully  main- 
tained that  supplying  light  and  heat  by  the  municipal- 
ity for  the  private  wants  of  citizens  in  connection  with 
its  plant  for  supplying  the  public  needs  is  any  less  a 
public  purpose  than  the  providing  of  town  clocks, 
scales,  and  pumps,  nor  that  the  convenience  and  com- 
fort of  its  citizens  would  require  the  one  and  not  the 
other.  In  fact,  experience  shows  that  in  crowded 
city  life  electric  light  and  gas  as  well  as  a  wholesome 
supply  of  water  in  private  houses  and  places  of  busi- 
ness are  practically  necessities,  and  there  can  be  no 
doubt  that  the  adequate  supply  of  such  public  utilities 
tends  very  materially  to  the  preservation  of  public 
health  and  peace  and  to  the  protection  of  property. 
This  court  had  found  that  the  supply  of  water  by  a 


85  IMPLIED    POWERS.  §51 

water-works  system  is  a  public  purpose  and  also  had 
conceded  that  the  legislature  has  unquestioned  power 
to  permit  cities  to  provide  gas  or  electric  light  for  the 
private  use  of  its  citizens.^" 

In  refusing  to  find  such  power  by  implication  the 
court  says:  "It  is  wholly  for  the  legislature  to  deter- 
mine, within  the  limitations  of  the  constitution,  the 
powers  which  towns  shall  possess,  and  when  it  appears 
that  the  custom  of  the  legislature  has  been  specifically 
to  define  from  time  to  time  the  purposes  for  which 
towns  may  raise  money  by  the  taxation  of  their  in- 
habitants, and  when  the  legislature  can  at  any  time 
grant  additional  powers  if  they  are  deemed  necessary, 
a  somewhat  strict  construction  of  existing  statutes 
seems  reasonable,  and  in  accordance  with  the  pre- 
sumed intention  of  the  legislature.  .  .  .  The 
subject  of  constructing  and  maintaining  gas  or  electric 
works  for  the  manufacture  of  gas  or  electricity  and 
the  distribution  thereof  through  the  streets  of  towns 
and  cities,  for  the  purpose  of  furnishing  light  is  one 
of  too  much  importance  to  be  attached  as  a  mere 
incident  to  the  power  given  to  erect  and  maintain 
street  lamps,  and  we  think  that  if  the  legislature  had 
intended  that  towns  generally  should  have  authority 
to  erect  and  maintain  such  works,  the  authority  would 
have  been  plainly  expressed  in  the  statutes." 

In  connection  with  this  clearly  defined  position  of 
the  Massachusetts  court  it  should  be  said  that  the 
towns  of  New  England  are  peculiar  in  that  power 
must  be  given  them  expressly  and  that  money  can  be 
raised  by  taxation  only  for  purposes  expressed  in  the 
statute  or  incidental  to  such  purposes.  With  this  in 
mind  it  will  be  seen  that  the  case  just  mentioned  is 
not  applicable  to,  or  binding  on,  our  courts  generally 

10  Opinion  of  the  Justices,  150  Mass.  592.  24  N.  E.  10S4,  8  L.  R. 
A.  487. 


§  52  PUBLIC    UTILITIES.  86 

for  an  examination  of  our  city  charters  will  disclose  no 
attempt  at  such  detailed  legislation  as  was  found  bind- 
ing on  this  particular  court. 

It  is  of  interest  to  note  that  after  this  decision  was 
handed  down,  January  12,  1891,  the  legislature 
promptly  acted  upon  the  suggestion  made  in  the  case, 
and  passed  a  general  act,  which  was  approved  June 
4,  1891,  giving  any  city  or  town  the  power  to  con- 
struct, purchase  or  lease,  and  maintain  within  its  lim- 
its one  or  more  plants  for  the  manufacture  and  dis- 
tribution of  gas  or  electricity  for  furnishing  light  for 
the  municipal  use,  or  light,  heat  or  power,  except  for 
the  operation  of  electric  cars,  for  the  use  of  its  in- 
habitants. This  act  was  passed  pursuant  to  the  Opin- 
ion of  the  Justices,  150  Mass.  592,  24  N.  E.  1084,  8 
L.  R.  A.  487,  rendered  May  27,  1890,  in  which  the 
court,  in  response  to  the  question  propounded  to  it 
by  the  legislature,  stated  that  it  was  within  the 
province  of  that  body  to  confer  upon  towns  and  cities 
the  power  to  manufacture  and  distribute  gas  or  elec- 
tricity for  the  use  of  their  inhabitants. 

§  52.  The  rule  in  Illinois. — The  Appellate  Court 
of  Illinois  in  Ladd  v.  Jones,  61  111.  App.  584,  decided 
in  1895,  in  refusing  recovery  for  electric  lighting  fur- 
nished under  an  ordinance  by  the  plaintiff  city  to  one 
of  its  inhabitants  for  private  use,  took  the  position 
that  such  city  acted  without  authority  in  furnishing 
the  light  because  such  power  had  not  been  expressly 
granted  to  it,  and  expressed  itself  to  the  effect  that, 
"powers  granted  to  cities  and  villages  by  legislative 
grant  must  be  strictly  construed."  It  is  to  be  re- 
gretted that  the  case  is  not  discussed  more  at  length 
so  that  the  reason  for  the  decision  might  more  clearly 
appear,  and  also  that  this  case  has  not  been  passed 
upon  by  the  Supreme  Court  of  the  state.     In  the  case 


87  IMPLIED    POWERS.  §  53 

of  Blanchard  v.  Benton,  109  111.  App.  569,  this  same 
court  in  1903  indicates  that  it  is  still  of  the  opinion 
expressed  in  the  former  case,  with  which  the  Supreme 
Court  of  Illinois  seems  inclined  to  agree." 

§  53.  The  New  Jersey  decision. — The  Supreme 
Court  of  New  Jersey  in  Howell  v.  Millville,  60  N.  J.  L. 
95,  36  Atl.  691,  decided  in  1896,  even  denies  that  an 
act  "authorizing  the  lighting  of  public  streets,  and 
places  in  the  cities,  towns,  townships,  boroughs,  and 
villages  of  the  state  and  to  erect  and  maintain  the 
proper  appliances,  etc.,"  gives  the  power  to  a  munici- 
pality to  erect  and  maintain  an  electric  light  plant  to 
light  its  streets.  It  is  submitted  that  in  view  of  this 
express  statute  the  case  in  refusing  to  find  authority 
for  the  city  to  erect  and  maintain  an  electric  light 
plant,  for  supplying  the  public  wants,  is  unsound  in  its 
reasoning  and  so  narrow  in  its  construction  as  not 
only  to  fail  to  give  effect  to  the  intention  of  the  legis- 
lature, but  virtually  to  annul  the  enactment.  The  case 
is  unsupported  by  authorities  and  does  not  represent 
the  attitude  of  our  courts  outside  of  the  particular 
jurisdiction. 

§  54.  The  California  rule  stated. — The  California 
case  of  Hyatt  v.  Williams,  148  Cal.  585,  84  Pac.  41, 
also  refuses  to  accept  the  doctrine  of  implied  powers 
in  this  connection.  It  says:  "The  terms  of  the  express 
grant  of  the  power  to  provide  light  for  the  public 
purposes  named  do  not  indicate  any  intention  to  give 
the  distinct  and  larger  power  to  establish  a  plant  for 
furnishing  light  for  private  use  to  all  the  inhabitants 
of  the  city  who  may  desire  it,  and  no  such  intention 
can  be  imputed  to  the  framers  of  the  charter  from 
the   language   there   employed.     .     .  The   question 

"  Palestine  v.  Siler,  225  111.  630,  80  N.  E.  345. 


§  54  PUBLIC    UTILITIES.  88 

whether  or  not,  if  the  city  had  erected  or  should  erect 
a  plant  to  supply  electric  light  for  the  public  streets, 
public  places,  and  public  buildings,  it  would  have 
power  to  distribute  any  surplus  thereof  to  the  inhabi- 
tants for  private  use  does  not  arise  in  the  case."  In 
the  course  of  this  rather  arbitrary  decision  the  court 
unfortunately  speaks  only  very  briefly  of  the  reasons 
for  holding  that  the  power  of  the  municipality  must 
be  so  limited;  and  no  case  is  discussed  or  even  cited 
and  no  authority  whatever  is  referred  to  except  the 
general  definition  of  the  powers  of  municipal  corpora- 
tions formulated  by  Judge  Dillon  over  forty  years 
before  and  probably  twenty  years  before  electricity 
was  thought  of  for  lighting  purposes  as  it  is  now  en- 
joyed. 

The  case  of  Gary  v.  Blodgett,  lo  Cal.  App.  463,  102 
Pac.  668,  very  materially  limits,  if  it  does  not  practi- 
cally reverse,  the  case  of  Hyatt  v.  Williams,  supra. 
The  decision,  however,  is  based  upon  a  statute  which 
immediately  followed  and  was  probably  the  result  of 
the  decision  in  the  Hyatt  case.  The  General  Laws  of 
Galifornia,  1906,  p.  898,  provide  that  "the  board  of 
trustees  of  said  city  shall  have  power  ...  to 
acquire,  construct,  repair  and  manage  pumps,  aque- 
ducts, reservoirs,  or  other  works  necessary  or  proper 
for  supplying  water  for  the  use  of  such  city  or  the 
inhabitants  ...  to  acquire,  own,  construct,  main- 
tain and  operate  .  .  .  gas  and  other  works  for 
light  and  heat."  In  holding  that  the  city  had  the 
power  to  furnish  electric  light  to  the  inhabitants  as 
well  as  to  itself,  although  there  was  no  express  pro- 
vision for  furnishing  light  for  the  inhabitants  the  court 
said:  "It  seems  clear,  though,  to  us  that  in  the  grant 
of  power  to  cities  of  the  sixth  class,  if  not  explicitly 
expressed,  it  is  at  least  necessarily  implied,  that  the 
municipality   shall  have   the   authority   to   furnish   the 


89  IMPLIED    POWERS.  §  54 

inhabitants  for  private  use  as  well  as  the  general 
public  with  electric  light.  In  the  grant  there  is  no 
specification  as  to  the  purposes  for  which  the  light  is 
to  be  furnished,  and  therefore  we  think  no  purpose 
for  which  such  works  are  usually  designed  and  oper- 
ated was  excluded  from  the  contemplation  of  the 
legislature  in  the  enactment  of  the  statute.  Indeed, 
it  would  be  a  strained  and  unnatural  construction  of 
the  language  used  to  hold  that  the  works  were  to  be 
devoted  simply  to  corporate  uses.  When  the  city  is 
expressly  authorized  'to  acquire,  own,  construct,  main- 
tain and  operate  .  .  .  gas  and  other  works  for 
light  and  heat,'  the  incidents  of  such  ownership  and 
right  of  operation  necessarily  follows.  Appellant's 
view  derogates  from  the  ordinary  meaning  of  the 
terms  used  and  writes  into  the  statute  a  restriction 
of  the  use,  which  we  have  no  right  to  assume  was  in 
the  mind  of  the  legislature.  If  the  same  grant  were 
made  to  an  individual,  no  one,  of  course,  would  con- 
tend for  such  a  limitation;  but  it  is  sought  here  because 
of  the  idea  that  it  is  hardly  within  the  legitimate  func- 
tions of  a  municipality  to  furnish  light  to  its  inhabi- 
tants. But  the  modern  decisions  recognize  this  as  a 
public  use  and  not  outside  of  the  usual  range  and 
scope  of  municipal  authority." 

The  case  of  Clark  v.  Los  Angeles,  i6o  Cal.  30,  116 
Pac.  722,  decided  by  the  Supreme  Court  of  California 
May  31,  191 1,  was  practically  identical  in  its  decision 
with  the  facts  and  the  legal  principle  involved  in  the 
case  of  Cary  v.  Blodgett,  supra.  In  holding  that  the 
city  undoubtedly  had  the  power  and  should  be  per- 
mitted to  supply  its  inhabitants  as  well  as  itself  with 
light,  the  court  said:  "It  is  difficult  to  perceive  how 
the  power  to  supply  electricity  to  the  inhabitants  of 
the  city  for  their  private  use  could  be  conferred  in 
clearer  or  more   appropriate  terms.     There   seems   to 


§  55  PUBLIC    UTILITIES.  90 

be  no  foundation  for  the  argument  that  the  power 
of  the  city  to  procure  or  produce  water,  gas  or  elec- 
tricity, and  supply  it  to  the  inhabitants  is  limited  by 
this  provision  to  the  procuring  of  these  substances 
for  public  uses  alone,  such  as  the  watering  of  public 
streets,  the  flushing  of  public  sewers,  the  lighting  of 
public  streets  and  buildings,  or  the  running  of  eleva- 
tors in  public  buildings  and  heating  the  rooms  therein. 
The  statement  of  the  proposition,  in  connection  with 
the  provision  above  quoted,  is  a  sufBcient  refutation  of 
it." 

The  court  recognized  the  case  of  Gary  v.  Blodgett, 
supra,  as  being  in  effect  identical  with  the  case  in 
question,  and  as  a  petition  for  its  rehearing  was  re- 
fused by  the  Supreme  Court,  that  court  held  the 
decision  in  the  Gary  case  as  practically  a  decision  by 
the  Supreme  Court  itself  to  the  effect  that  "the  stat- 
ute giving  power  to  cities  of  the  sixth  class  'to  acquire, 
own,  construct,  maintain  and  operate  street  railways, 
telephone  and  telegraph  lines,  gas  and  other  works, 
for  light  and  heat'  (§  862,  St.  1906,  p.  898,  Mun.  Cor. 
Act),  authorized  such  cities  to  erect  and  operate  an 
electric  light  plant,  and  thereby  supply  the  inhabitants 
of  the  city  with  electricity  for  private  use." 

§  55.  Municipality  limited  to  enterprises  of  public 
nature. — By  way  of  further  illustration  and  definition 
of  the  powers  of  municipal  corporations  to  own  and 
operate  municipal  public  utilities,  it  may  be  helpful  to 
discuss  at  this  point  the  right  of  such  corporations  to 
engage  in  enterprises  ordinarily  regarded  as  being 
exclusively  of  a  private  nature  and  which  are  generally 
carried  on  by  private  concerns  operating  at  least 
theoretically  under  the  natural  law  of  competition. 
The  power  of  municipal  corporations  to  engage  in 
any  business  enterprise  requiring  revenue  derived  from 


91  IMPLIED    POWERS.  §  56 

taxation  for  its  maintenance  is  limited  by  the  consti- 
tution, as  has  been  seen,  to  those  undertakings  which 
are  pubHc  or  municipal  in  their  nature  or  such  as  are 
regarded  as  necessary  or  incidental  to  the  purposes 
for  which  such  corporations  were  created. 

§  56.  Taxation  only  for  public  purposes. — Taxation 
which  takes  the  private  property  of  the  party  paying 
the  tax  for  a  private  use  and  for  the  benefit  and  sup- 
port of  an  individual  manufacturer  or  to  engage  in  the 
sale  of  coal,  wood  or  such  like  material  for  fuel  which 
is  distinctly  a  private  enterprise  would  clearly  be  con- 
trary to  the  rule  that  taxes  can  only  be  levied  for  pub- 
lic purposes  and  within  the  inhibition  of  the  constitu- 
tion limiting  the  power  of  municipal  corporations  to 
municipal  or  public  objects.  It  is  therefore  beyond 
the  authority  of  the  municipal  corporation  to  assist  or 
engage  in  the  manufacturing  business  or  in  the  sale 
of  commodities  which  are  and  can  be  easily  conducted 
by  private  business  concerns  in  competition  with  each 
other,  which  serves  sufficiently  to  regulate  them. 

§  57.  Municipal  public  utilities  public  and  natural 
monopolies. — The  nature  of  the  business  of  such  pri- 
vate enterprises  and  the  way  in  which  their  products 
are  distributed  make  it  unnecessary  as  well  as  inex- 
pedient that  it  be  conducted  as  a  single  enterprise  for 
the  entire  municipality.  The  distribution  of  such 
municipal  public  utilities  as  light,  heat,  transportation 
and  the  improved  methods  of  communication  are 
natural  monopolies,  and  in  the  interest  of  economy 
and  from  the  nature  of  the  product  and  the  manner 
of  its  distribution,  one  system  serving  the  entire  munic- 
ipality is  the  most  advantageous  manner  of  furnishing 
the  city  and  its  inhabitants  with  such  public  utilities. 
Being  a  monopoly  in  its  very  nature  and  because  the 


§  58  PUBLIC    UTILITIE3.  g2 

service  of  distribution  must  be  comprehensive  and 
should  be  coextensive  with  the  city,  no  opportunity 
is  left  for  regulation  by  competition,  for  the  customer 
has  no  choice  and  individually  practically  no  voice  in 
the  matter  of  the  service  which  he  receives.  This 
makes  governmental  regulation  necessary  and  fur- 
nishes the  occasion  for  permitting  municipal  corpora- 
tions to  own  and  operate  or  otherwise  control  munici- 
pal public  utilities, 

§  58.  Private  enterprises  controlled  by  compsti- 
tion. — There  is  no  occasion  for  such  regulation  or 
control  over  private  business  concerns  engaged  in 
individual  enterprises,  which  operate  singly  and  are 
naturally  controlled  by  competition  between  the  dif- 
ferent business  concerns  providing  the  same  com- 
modity; and  the  courts  have  accordingly  refused  to 
sustain  the  attempts  of  municipalities  to  conduct  a 
brick  making  business  or  to  engage  in  the  sale  of  coal 
and  wood  as  fuel  or  to  assist  private  manufacturing 
concerns  for  the  purpose  of  increasing  the  general 
business  interests  and  the  prosperity  of  the  particular 
municipality;  and  while,  as  we  have  already  found, 
the  municipal  corporation  will  be  permitted  to  use  to 
the  best  advantage  or  to  dispose  of  any  surplus  en- 
ergy or  capacity,  which  it  may  not  need  at  the  time 
for  its  own  use,  the  courts  will  not  permit  the  erection 
by  a  municipality  of  a  building  or  the  acquirement 
of  a  power  plant  primarily  for  private  use  and  only 
incidentally  for  municipal  purposes.  To  be  valid  its 
chief  use  must  be  municipal  and  the  disposition  to 
private  ends  merely  incidental.  As  this  principle 
constitutes  a  well  defined  limitation  on  the  power  of 
municipal  corporations  in  this  connection,  although  its 
application  has  to  do  with  enterprises  of  a  private 
<haracter  as  distinguished  from  those  concerning  mu- 


93  IMPLIED    POWERS.  §  59 

nicipal  public  utilities,  a  few  cases  will  be  noted  by 
way  of  illustration  of  this  principle  of  limitation  as 
applied  to  matters  which  are  not  classified  as  munici- 
pal public  utilities." 

§  59.  Municipality  can  not  erect  opera  house. — 
In  the  case  of  Brooks  v.  Brooklyn,  146  Iowa  136,  124 
N.  W.  868,  decided  in  1910,  in  refusing  to  find  in  the 
municipality  power  to  build  and  maintain  an  opera 
house,  the  court  said:  "We  are  abidingly  satisfied 
that  the  building,  as  planned,  is  not  such  a  one  as  the 
town  had  authority  to  build.  It  is  in  fact  an  opera 
house  with  all  the  necessary  equipment  for  such  a 
building.  The  town  offices  and  the  place  for  the 
fire  department  were  mere  incidents  to  the  building. 
However  desirable  it  may  be  for  rural  towns  to  have 
a  large  assembly  hall  or  opera  house,  it  is  not  within 
the  power  of  the  town  council  to  build  it.  The  officials 
are  not  ordinarily  selected  to  manage  theaters  or 
opera  houses,  and  in  view  of  the  fact  that  when  so 
managed  the  town  becomes  responsible  for  their  care 
and  safety,  and  is  liable  to  any  one  injured  by  or 
through  the  neglect  of  any  of  the  officials  or  em- 
ployes of  the  city,  it  is  a  burden  which  should  not  be 
assumed.  There  was  no  need  for  such  a  building  for 
municipal  purposes,  and  it  is  but  a  thin  disguise  to 
cover  a  purpose  not  authorized  by  law." 

12  COLORADO.— Denver  v.   Hallett,   34  Colo.   393,  83  Pac.   1066. 

FEDERAL.— Sutherland-Innes  Co.  v.  Evart,  86  Fed.  597. 

GEORGIA.— Keen  v.  Waycross,  101  Ga.  588,  29  S.  E.  42. 

IOWA.— Brook  v.  Brooklyn,  146  Iowa  136,  124  N.  W.  868. 

MASSACHUSETTS.— Municipal  Fuel  Plants,  In  re,  182  Mass. 
605,  66  N.  E.  25. 

MICHIGAN.— Attorney  General  v.  Detroit,  150  Mich.  310,  113  N. 
W.  1107;  Baker  v.  Grand  Rapids,  142  Mich.  687,  106  N.  W.  208. 

TEXAS.— Nalle  v.  Austin,  S5  Tex.  520,  21  S.  W.  375,  22  S.  W.  668. 

UNITED  STATES.— Parkersburg  v.  Brown,  106  U.  S.  4S7,  27  I*, 
ed.  238. 


§  60  PUBLIC    UTILITIES.  94 

§  60.  Brick  making  a  private  business. — The  case 
of  Attorney  General  v.  Detroit,  150  Mich.  310,  113  N. 
W.  1 1 07,  decided  in  1907,  illustrates  the  limitation 
placed  upon  municipal  corporations,  where  the  court 
refused  them  the  right  to  enter  the  field  of  competition 
and  private  business  undertakings.  In  addition  to 
such  an  attempt  being  beyond  their  power,  it  was  held 
to  be  both  unnecessary  and  unfair  to  permit  municipali- 
ties to  engage  in  an  ordinary  private  enterprise  which 
competition  controls  and  regulates,  because  in  doing 
so  it  would  operate  to  the  disadvantage  of  the  private 
citizen  engaged  in  that  line  of  business  and  finally  re- 
sult in  his  forced  withdrawal  from  the  business;  and 
so  holding,  the  court  speaks  as  follows :  "We  agree 
with  the  opinion  filed  in  the  circuit  court  that  the 
power  to  engage  in  the  business  of  brick  making  is  not 
included  in  the  powers  expressly  granted  to  the  city, 
and  that  it  is  neither  fairly  implied  in,  nor  incident  to, 
such  powers  as  are  expressly  granted;  nor  is  it  indis- 
pensable or  even  essential  to  the  declared  objects  and 
purposes  of  the  corporation.  While  the  law  permits 
municipal  corporations  to  do  those  things  which  are 
necessary  to  accomplish  the  objects  of  their  creation, 
under  an  implication  of  power  (Dil.  Mun.  Corp.  4th 
ed.,  §  89,  8  Cu.  Law  1062)  the  right  has  not  usually 
been  held  to  go  so  far  as  to  permit  them  to  engage  in 
the  manufacture  of  matters  necessary  to  their  lawful 
enterprises,  where  they  are  in  common  use  and  are 
to  be  had  in  the  open  market." 

§  61.  Sale  of  coal  and  wood  not  a  municipal  or 
public  purpose. — The  case  of  In  re  Municipal  Fuel 
Plants,  182  Mass.  605,  66  N.  E.  25,  decided  in  1903, 
furnishes  an  excellent  statement  of  this  principle  to- 
gether with  the  reason  upon  which  it  is  founded  in  the 
following  terms:      "It   is    established   that   under   our 


95  IMPLIED    POWERS.  §  62 

constitution  private  property  can  not  be  taken  from 
its  owner  except  for  a  public  use.  This  is  equally  true 
whether  the  property  is  a  dwelling  house,  taken  by 
right  of  eminent  domain,  or  money  demanded  by  the 
tax  collector.  The  establishment  of  a  business  like 
the  buying  and  selling  of  fuel  requires  the  expenditure 
of  money.  If  this  is  done  by  an  agency  of  the  govern- 
ment, there  is  no  way  to  obtain  the  money  except  by 
taxation.  Money  can  not  be  raised  by  taxation  except 
for  a  public  use.  ...  If  men  of  property,  owning 
coal  and  wood  yards,  should  be  compelled  to  pay  taxes 
for  the  establishment  of  a  rival  coal  yard  by  a  city 
or  town,  to  furnish  fuel  at  cost,  they  would  thus  be 
forced  to  make  contributions  of  money  for  their  own 
impoverishment;  for,  if  the  coal  yard  of  the  city  or 
town  was  conducted  economically,  they  would  be 
driven  out  of  business.  A  similar  result  would  follow 
if  the  business  of  furnishing  provisions  and  clothing, 
and  other  necessaries  of  life,  were  taken  up  by  the 
government;  and  men  who  now  earn  a  livelihood  as 
proprietors  would  be  forced  to  work  as  employes  in 
stores  and  shops  conducted  by  the  public  authorities, 
.  .  .  The  business  of  selHng  fuel  can  be  conducted 
easily  by  individuals  in  competition.  It  does  not  re- 
quire the  exercise  of  any  governmental  function,  as 
does  the  distribution  of  water,  gas,  and  electricity, 
which  involves  the  use  of  the  public  streets  and  the 
exercise  of  the  right  of  eminent  domain.  It  is  not 
important  that  it  should  be  conducted  as  a  single 
large  enterprise,  with  supplies  emanating  from  a  single 
source,  as  is  required  for  the  economical  management 
of  the  kinds  of  business  last  mentioned." 

§  62.  Municipality  can  not  assist  private  enter- 
prises.— That  the  city  will  not  be  permitted  to  assist 
private    individuals    in    their    private    enterprises    any 


§  (i2  PUBLIC   UTILITIES.  96 

more  than  it  will  be  permitted  to  enter  into  such  lines 
of  business  itself  and  for  the  same  reason  naturally,  is 
well  stated  in  the  case  of  Parkersburg  v.  Brown,  io6 
U.  S.  487,  27  L.  ed.  238,  decided  in  1883,  as  follows: 
"But  we  are  of  opinion  that,  within  the  principles 
decided  by  this  court  in  the  case  of  Loan  Association 
V.  Topeka,  20  Wall.  655,  the  bonds  in  question  here 
are  void.  The  act  of  1868  authorizes  the  bonds  to  be 
issued  as  the  bonds  of  the  city.  The  principal  and 
interest  are  to  be  paid  by  the  city.  The  bonds  are  to 
be  lent  to  persons  engaged  in  manufacturing.  .  .  . 
The  city  is  to  pay  the  principal  and  interest  of  the 
bonds,  according  to  their  tenor,  whether  the  'bor- 
rower' pay  the  city  or  not.  No  other  source  of  pay- 
ment being  provided  for  the  city,  the  implication  is 
that  the  city  is  to  raise  the  necessary  amount  by  taxa- 
tion. ...  A  legitimate  use  of  the  moneys  so 
raised  by  taxation  is  to  pay  the  debts  of  the  city. 
Taxation  to  pay  the  bonds  in  question  is  not  taxation 
for  a  public  object.  It  is  taxation  which  takes  the 
private  property  of  one  person  for  the  private  use  of 
another  person.  .  .  .  There  was  no  provision  in 
the  Constitution  of  West  Virginia  of  1862,  authorizing 
the  levying  of  taxes  to  be  used  to  aid  private  persons 
in  conducting  a  private  manufacturing  business.  This 
being  so,  the  legislature  had  no  power  to  enact  the  Act 
of  1868." 

Nor  will  the  city  be  permitted  to  assist  a  private 
business  concern  indirectly  and  under  the  guise  of 
performing  a  municipal  service  by  building  a  dam  to 
furnish  water  and  water  power  when  the  main  pur- 
pose is  to  engage  in  or  to  assist  others  in  conducting 
a  private  manufacturing  enterprise.  The  court  in  the 
case  of  Nalle  v.  Austin,  85  Tex.  520,  21  S.  W.  375,  22 
S.  W.  668,  decided  in  1893,  expresses  this  opinion  as 
follows :    "If  the  main  purpose  of  the  city  is  to  engage 


97  IMPLIED    POWERS.  §  62 

in  the  unlawful  enterprise,  it  can  not  give  the  illegal 
act  life  by  naming  it  for  a  purpose  that  is  lawful,  and 
disguising  the  true  purpose  under  the  semblance  of 
legal  authority.  Declaring  the  exercise  of  power  in 
the  given  instance  to  be  for  a  purpose  within  its  charter 
powers,  does  not  add  any  validity  to  the  illegal  act; 
for  such  act  is  not  only  ultra  vires  the  city  charter, 
but  is  in  law  a  fraud  upon  the  rights  of  the  taxpayers. 
The  declaration  made  by  the  city  council,  through  the 
ordinances  authorizing  the  issuance  of  the  bonds,  that 
the  purpose  in  building  the  dam  was  to  furnish  the 
city  with  water  and  lights,  although  for  an  apparent 
legal  purpose,  is,  according  to  the  allegations  of  the 
count  of  the  petition  quoted,  for  the  main  purpose  of 
furnishing  the  city  water  power  to  engage  in  manu- 
facturing enterprises,  and  that  furnishing  the  city  with 
water  and  lights  is  simply  incidental  to  such  main 
purpose.  The  city  has  no  power  to  engage  in  manu- 
facturing enterprises,  and  to  devote  the  funds  of  the 
city  to  that  purpose.  If  this  be  the  principal  purpose 
and  object  in  erecting  the  dam,  and  issuing  the  bonds, 
the  fact  that  there  is  incidentally  connected  with  such 
enterprise  a  purpose  that  is  lawful  will  not  give  any 
life  and  validity  to  the  illegal  purpose ;  but  the  whole 
transaction  is  tainted  with  the  vice  of  the  forbidden 
object,  and  is  in  its  entirety  illegal.  .  .  .  What  is 
here  said  simply  relates  to  the  original  unlawful  pur- 
pose in  erecting  the  dam  and  issuing  the  bonds.  We 
do  not  desire  to  be  understood  as  holding  that  a  city 
has  no  power  to  devote  to  uses  for  purposes  not  public 
that  portion  of  public  structures  and  buildings  not 
necessary  to  be  used  for  public  purposes;  for,  if  there 
be  an  excess  for  public  use,  the  city  can  reap  a  benefit 
by  renting  it.  The  law  does  not  permit  the  city  to 
engage  in  manufacturing  enterprises,  and  use  the  ex- 
cess of  water  for  such  purpose;  but  it  would  permit 
7— Pub.  ut. 


§  63  PUBLIC    UTILITIES.  98 

the  city,  if  there  should  be  an  excess  above  that  used 
for  public  purposes,  to  derive  a  revenue  by  renting  it." 

§  63.  Municipal  plumbing  not  incidental  to  its 
water-works. — The  case  of  Keen  v.  Waycross,  loi 
Ga.  588,  29  S.  E.  42,  decided  in  1897,  conceding  that 
the  municipal  corporation  has  the  power  to  own  and 
operate  its  water-works  system  and  take  all  necessary 
steps  in  order  to  render  proper  service  in  that  con- 
nection, holds,  however,  that  it  was  not  necessary  for 
the  city  to  engage  in  the  plumbing  business  for  the 
reason  that  such  service  could  be  furnished  at  the 
hands  of  private  parties  and  that  such  power  was 
never  intended  to  be  conferred  upon  the  city.  In  its 
decision  the  court  speaks  as  follows :  "It  was  doubt- 
less the  intention  of  the  legislature  to  confer  power 
upon  the  municipal  authorities  to  do  everything  essen- 
tial to  the  establishment  and  maintenance  of  the  city's 
water-works  system,  to  provide  for  proper  sanitation, 
and  to  promote  the  general  success  of  the  enterprise; 
but,  surely  it  was  never  contemplated  that  the  city 
should  engage  in  a  general  plumbing  business,  and, 
in  the  course  thereof,  sell  supplies  and  materials  to 
private  citizens,  and  do  contract  work  in  placing  the 
same  upon  their  premises.  As  incident  to  the  general 
powers  conferred  upon  the  water-works  commission- 
ers, it  was  lawful  for  them  to  order  all  work  done 
which  was  necessary  for  connecting  the  city's  mains 
with  the  pipes  of  water  consumers,  or  for  protecting 
the  city's  property  from  injury  or  destruction,  or  for 
requiring  citizens  to  pay  for  the  water  furnished  to 
them,  but  they  could  not,  without  overstepping  the 
bounds  of  their  authority  in  the  premises,  engage  in 
a  business  purely  for  gain,  and  the  carrying  on  of 
which  was  not  essential  to  the  accomplishment  of 
any  of  the  purposes  above  indicated." 


99  IMPLIED    POWERS.  §  64 

§  64.  Municipal  coliseum  authorized  by  constitu- 
tion— "home  rule." — On  the  other  hand  the  case  of 
Denver  v.  Hallett,  34  Colo.  393,  83  Pac.  1066,  decided 
in  1905,  furnishes  an  interesting  example  of  progres- 
sive legislation  and  constitution  making.  In  sustaining 
the  power  of  the  city  of  Denver  to  erect  and  maintain 
a  large  hall  suitable  for  the  use  of  national  conven- 
tions and  the  like  as  well  as  for  assemblies  of  its  own 
citizens,  and  for  the  graduating  exercises  of  the  city 
schools,  the  court  only  gave  effect  to  legislative  action 
which  conferred  upon  this  city  practically  all  the  power 
possessed  by  the  legislature,  as  provided  for  by  the 
constitution  in  granting  what  is  popularly  described 
as  "home  rule"  for  Denver.  The  case  goes  far  beyond 
the  general  rule  under  which,  as  we  have  seen,  home 
rule  is  not  permitted  the  municipal  corporation.  In 
the  course  of  its  decision  the  court  says  that:  "The 
purpose  of  the  twentieth  article  [of  the  constitution] 
was  to  grant  home  rule  to  Denver  and  the  other  mu- 
nicipalities of  the  State,  and  it  was  intended  to  en- 
large the  powers  beyond  those  usually  granted  by  the 
legislature;  and  so  it  was  declared  in  the  article  that, 
until  the  adoption  of  a  new  charter  by  the  people,  the 
charter  as  it  then  existed  should  be  the  charter  of 
the  municipality;  and,  further,  that  the  people  of 
Denver  shall  always  have  the  exclusive  power  of  mak- 
ing, altering,  revising,  or  amending  their  charter;  and, 
further,  that  the  charter,  when  adopted  by  the  people, 
should  be  the  organic  law  of  the  municipality  and 
should  supercede  all  other  charters.  It  was  intended 
to  confer  not  only  the  powers  specially  mentioned, 
but  to  bestow  upon  the  people  of  Denver  every  power 
possessed  by  the  legislature  in  the  making  of  a  charter 
for  Denver.  .  ,  .  There  is  no  apparent  reason 
why  the  taxpayers  of  Denver  may  not,  under  a  con- 
stitutional provision  limiting  the  power  to  assess  and 


§  64  PUBLIC   UTILITIES.  lOO 

collect  taxes  to  the  'purposes  of  such  corporation,'  by- 
vote  order  the  erection  of  an  auditorium  for  public 
purposes,  even  though  it  be  incidentally  used  for  con- 
ventions and  national  associations." 


■ 


^ 


CHAPTER  VI. 

THE   CONSTITUTIONAL   LIMITATION  OF 
MUNICIPAL  INDEBTEDNESS. 

Section. 

65.  Municipal  indebtedness. 

66.  A  precaution  against  improvidence. 

67.  Distribution  of  cost  of  municipal  public  utilities. 

68.  Indebtedness  defined  and  distinguished. 

69.  Expense  of  plant  and  of  necessary  service  distinguished. 

70.  Installment  payment  purchase. 

71.  Purchase  of  encumbered  property. 

72.  Contract  obligations  payable  in  future. 

73.  Encumbering  property  before   sale  to  municipality. 

74.  Debts  payable  out  of  special  fund. 

75.  Bonds   payable   from   revenue   of   plant. 

76.  "Mueller  law"  certificates. 

77.  Purchase  price  payable  only  out  of  revenue  of  plant. 

78.  Payment  same  as  by  "special  assessments." 

79.  Park-land  purchase  certificates. 

80.  Option  agreements  of  purchase. 

81.  Option  to  purchase  water-works. 

82.  Purchase  of  water-works  by  piecemeal. 

83.  Debt  accrues  as  service  is  furnished  under  serial  contracts. 

84.  Necessary   service   payable   from   current  revenue. 

85.  Debt  only  created  when  service  furnished. 

86.  Current  service  payable  out  of  current  revenue. 

§  65.  Municipal  indebtedness. — Municipal  indebt- 
edness is  a  further  constitutional  limitation  upon  the 
power  of  municipal  corporations  to  own  and  operate 
municipal  public  utilities  in  addition  to  that  constitu- 
tional limitation  already  discussed,  restricting  the 
power  of  municipalities  to  provide  themselves  only 
with  such  municipal  public  utilities  as  are  concerned 
with  and  included  in  "municipal  purposes"  within  the 
meaning  of  the  constitution.     The  power  of  municipal 

lOI 


§  66  PUBLIC    UTILITIES.  I02 

corporations  to  engage  in  any  commercial  enterprise 
requiring  revenue  to  be  raised  by  taxation  is  neces- 
sarily limited  by  the  constitution  to  such  business 
undertakings  as  come  within  "municipal  purposes," 
for  it  is  only  such  purposes  that  may  be  supported  by 
taxation. 

§  66.     A  precaution  against  improvidence. — As  an 

additional  precaution  against  the  improvidence  of 
municipalities,  the  constitutions  of  our  different  states 
have  placed  an  express  limitation  upon  the  power  of 
such  corporations,  which  in  most  of  the  state  con- 
stitutions is  absolute  and  without  regard  to  the  object 
to  be  attained  by  the  exercise  of  the  power  in  any 
particular  case.  While  the  amount  of  municipal  in- 
debtedness which  is  permitted  by  the  constitutions  of 
the  different  states  varies  slightly,  as  a  general  rule 
the  municipality  may  not  become  indebted  for  more 
than  five  per  cent,  of  the  taxable  value  of  its  property. 
This  limitation  on  the  municipality  of  its  power  to 
incur  debt  has  been  recently  imposed  because  of  the 
frequent  serious  abuse  of  the  exercise  by  the  munici- 
pality of  its  power  and  discretion  to  the  point  of  im- 
providence. The  tendency  to  acquire  municipal  pubHc 
utilities  and  other  conveniences  beyond  the  present 
financial  ability  of  the  particular  city  through  a  bond 
issue  payable  by  the  next  or  succeeding  generations 
rather  than  in  part,  at  least,  by  the  generation  which 
first  enjoys  the  convenience  of  such  public  utilities 
became  so  general  and  the  amount  of  indebtedness  thus 
assumed,  the  payment  of  which  was  so  far  postponed, 
was  so  serious  that  the  various  states  were  obhged  to 
restrict  this  tendency  by  limiting  the  amount  of  in- 
debtedness which  the  municipality  could  incur  by 
constitutional  provisions  to  that  effect. 


I03  DEBT    LIMITATION.  §  6/ 

§  67.  Distribution  of  cost  of  municipal  public  util- 
ities.— The  cost  of  securing  the  advantages  of  munici- 
pal pubHc  utiHties,  in  addition  to  providing  other 
permanent  pubHc  improvements  in  the  way  of  public 
buildings,  paved  streets,  parks  and  boulevards,  is 
naturally  so  great  as  to  make  it  practically  impossible 
for  the  generation  providing  them  to  meet  the  entire 
expense  of  doing  so;  and  as  these  conveniences  w^ill 
remain  available  for  the  enjoyment  of  future  genera- 
tions as  well  as  the  one  that  provides  them,  it  is  only 
equitable  that  the  expense  necessarily  incurred  in 
securing  such  advantages  to  the  particular  municipal- 
ity should  be  divided  and  a  part  of  the  amount  remain 
for  the  coming  generations  to  pay  in  the  form  of  a 
bond  issue  extending  over  varying  periods.  Many  in- 
genious devices  have  been  resorted  to  by  different 
municipal  corporations  in  their  attempt  to  evade  the 
constitutional  limitation  of  indebtedness  in  order  to 
provide  in  some  practicable  way  for  the  securing  of 
these  conveniences  presently  and  for  their  payment  in 
the  future. 

§  68.     Indebtedness    defined    and    distinguished. — 

The  limitation  of  municipal  indebtedness,  however, 
was  created  by  the  very  necessity  of  the  situation  and 
is  maintained  by  most  of  the  courts  in  its  full  force 
and  effect,  although  in  many  cases  the  providing  of 
public  utilities  is  permitted  in  the  face  of  the  limitation 
of  indebtedness  because  it  is  a  necessary  current 
expense,  and  a  contract  for  such  service  running 
through  a  number  of  years  is  generally  upheld  although 
the  aggregate  amount  to  be  paid  under  the  contract 
may  exceed  the  debt  limit.  In  addition  to  this  being 
a  rule  of  necessity  it  is  a  practical  business  principle, 
providing  the  current  revenue  of  any  particular  year 
is  sufficient  to  pay  for  the  municipal  public  utilities  for 


§  68  PUBLIC    UTILITIES.  IO4 

that  period.  Aside,  however,  from  this  sort  of  an 
exception  to  the  general  rule,  the  purpose  of  restrict- 
ing the  expenditure  of  the  municipality  by  the  im- 
position of  a  constitutional  debt  limit  is  maintained 
by  requiring  that  the  municipality  pay  cash  on  reach- 
ing the  limit  fixed  by  the  constitution. 

By  way  of  illustration  and  further  definition  of  the 
term  "indebtedness"  within  the  meaning  of  the  con- 
stitution, the  following  cases  are  in  point  :^ 

1  ALABAMA.— Capital  City  Water  Co.  v.  Montgomery,  92  Ala. 
366,  9  So.  343. 

CALIFORNIA.— Higgins  v.  San  Diego,  118  Cal.  524,  45  Pac.  824, 
50  Pac.  670;  McBean  v.  Fresno,  112  Cal.  159,  44  Pac.  358,  31  L.  R. 
A.  794,  53  Am.  St.  191. 

COLORADO.— Donahue  v.  Morgan,  24  Colo.  389,  50  Pac.  1038. 

FEDERAL.— Anoka  Water  Works,  &c.,  Co.  v.  Anoka,  109  Fed. 
580;  Cunningham  v.  Cleveland,  98  Fed.  657;  Defiance  Water  Co.  v. 
Defiance,  90  Fed.  753;  Fidelity  Trust  &  G.  Co.  v.  Fowler  Water  Co., 
113  Fed.  560;  Kiehl  v.  South  Bend,  76  Fed.  921,  36  L.  R.  A.  228; 
Ottumwa  V.  City  Water  Supply  Co.,  119  Fed.  315,  59  L.  R.  A.  604. 

GEORGIA.— Dawson  v.  Dawson  Waterworks  Co.,  106  Ga.  696,  32 
S.  E.  907;   Grace  v.  Hawkinsville,  101  Ga.  553,  28  S.  E.  1021. 

ILLINOIS.— Culbertson  v.  Fulton,  127  111.  30,  18  N.  E.  781;  Dan- 
ville V.  Danville  Water  Co.,  ISO  111.  235,  54  N.  E.  224;  Dutton  v. 
Aurora,  114  111.  138,  28  N.  E.  461;  East  Moline  v.  Pope,  224  111.  386, 
79  N.  E.  587;  Evans  v.  Holman,  244  111.  596,  91  N.  E.  723;  Joliet  v. 
Alexander,  194  111.  457,  62  N.  E.  861;  Lobdell  v.  Chicago,  227  111.  218, 
81  N.  E.  354;  People  ex  rel.  Schwon  v.  Chicago  &  Alton  R.  Co.,  253 
111.  191,  97  N.  E.  310;  Prince  v.  Quincy,  105  111.  138,  105  111.  215,  44 
Am.  Rep.  785;  Prince  v.  Quincy,  128  111.  443,  21  N.  E.  768;  Schnell  v. 
Rock  Island,  232  111.  89,  83  N.  E.  462,  14  L.  R.  A.  (N.  S.)  874. 

INDIANA.— Crowder  v.  Sullivan,  128  Ind.  486,  28  N.  E.  94,  13  L. 
R.  A.  647;  Valparaiso  v.  Gardner,  97  Ind.  1,  49  Am.  Rep.  416;  Vos3 
V.  Waterloo  Water  Co.,  163  Ind.  69,  71  N.  E.  208,  66  L.  R.  A.  95,  106 
Am.  St.  201. 

IOWA.— Burlington  Water  Co.  v.  Woodward,  49  Iowa  58;  Creston 
Water  Works  Co.  v.  Creston,  101  Iowa  687,  70  N.  W.  739;  Davis  v, 
Des  Moines,  71  Iowa  500,  32  N.  W.  470;  Grant  v.  Davenport,  36  Iowa 
396;  Swanson  v.  Ottumwa,  118  Iowa  161,  91  N.  W.  1048,  59  L.  R.  A. 
620;  Windsor  v.  Des  Moines,  110  Iowa  175,  81  N.  W.  476,  80  Am.  St. 
280. 

KENTUCKY.— Overall  v.  Madisonville,  125  Ky.  684,  102  S.  W. 


105  I^EBT    LIMITATION.  §  69 

§  69.  Expense  of  plant  and  of  necessary  service 
distinguished. — In  the  case  of  Voss  v.  Waterloo  Water 

278,  12  L.  R.  A.  (N.  S.)  433;  Owensboro  Waterworks  Co.  v.  Owena- 
boro,  29  Ky.  L.  1118,  96  S.  W.  867,  191  U.  S.  358,  48  L.  ed.  217. 

MAINE.— Kennebec  Water  Dist.  v.  Waterville,  96  Maine  234,  52 
Atl.  774;  Reynolds  v.  Waterville,  92  Maine  292,  42  Atl.  553. 

MASSACHUSETTS.— Browne  v.  Boston,  179  Mass.  321,  60  N.  E. 
934;  Smith  v.  Dedham,  144  Mass.  177,  10  N.  E.  782. 

MICHIGAN.— Ludington  Water-Supply  Co.  v.  Ludington,  119 
Mich.  480,  78  N.  W.  558. 

MINNESOTA.— Kelly  v.  Minneapolis,  63  Minn.  125,  65  N.  W.  115, 
30  L.  R.  A.  281;  Woodbridge  v.  Duluth,  57  Minn.  256,  59  N.  W.  296. 

MISSOURI.— Aurora  Water  Co.  v.  Aurora,  129  Mo.  540,  31  S.  W. 
946;  Lamar  Water  &  Electric  Light  Co.  v.  Lamar,  128  Mo.  188,  140 
Mo.  145,  26  S.  W.  1025,  31  S.  W.  756,  39  S.  W.  768,  32  L.  R.  A.  157. 

MONTANA.— Davenport  v.  Kleinschmidt,  6  Mont.  502,  13  Pac. 
249;  Palmer  v.  Helena,  19  Mont.  61,  47  Pac.  209. 

NEBRASKA.— State  ex  rel.  Tarr  v.  Crete,  32  Nebr.  568,  49  N. 
W.  272. 

NEW  YORK.— Levy  v.  McClellan,  196  N.  Y.  178,  89  N.  E.  569; 
Plattsburgh,  In  re,  157  N.  Y.  84,  51  N.  E.  512;  Port  Jervis  Water- 
works Co.  V.  Port  Jervis,  151  N.  Y.  Ill,  45  N.  E.  388. 

RHODE  ISLAND.— Peabody  v.  Westerly  Waterworks,  20  R.  I. 
176,  37  Atl.  807. 

SOUTH  CAROLINA.— Luther  v.  Wheeler,  73  S.  Car.  83,  52  S.  E. 
874,  4  L.  R.  A.  (N.  S.)  746. 

TEXAS.— Nalle  v.  Austin,  85  Texas  520,  21  S.  W.  375,  22  S.  W.  668. 

UNITED  STATES.- Walla  Walla  v.  Walla  Walla  Water  Co.,  172 
U.  S.  1,  43  L.  ed.  341. 

WASHINGTON.— Austin  v.  Seattle,  2  Wash.  667,  27  Pac.  557; 
Dean  v.  Walla  Walla,  48  Wash.  75,  92  Pac.  895;  Faulkner  v.  Seattle, 
19  Wash.  320,  53  Pac.  365;  Metcalf  v.  City  of  Seattle,  1  Wash.  297, 
25  Pac.  1010;  Seymour  v.  Tacoma,  6  Wash.  427,  33  Pac.  1059;  State 
ex  rel.  Port  Townsend  v.  Clausen,  40  Wash.  95,  82  Pac.  187;  Win- 
ston v.  Spokane,  12  Wash.  524,  41  Pac.  888. 

WEST  VIRGINIA.— Allison  v.  Chester,  69  W.  Va.  533,  72  S.  E. 
472,  37  L.  R.  A.  (N.  S.)  1042. 

WISCONSIN.— Burnham  v.  Milwaukee,  98  Wis.  128,  73  N.  W. 
1018;  Connor  v.  Marshfield,  128  Wis.  280,  107  N.  W.  639;  Earles  v. 
Wells,  94  Wis.  285,  68  N.  W.  964,  59  Am.  St.  886;  Milwaukee  v. 
Milwaukee  County,  95  Wis.  424,  69  N.  W.  819;  Oconto  City  Water 
Supply  Co.  v.  Oconto,  105  Wis.  76,  80  N.  W.  1113;  Perrigo  v.  Mil- 
waukee, 92  Wis.  236,  65  N.  W.  1025;  Stedman  v.  Berlin,  97  Wis.  505, 
73  N.  W.  57. 


§  69  PUBLIC    UTILITIES.  I06 

Co.,  163  Ind.  69,  71  N.  E.  208,  66  L.  R.  A.  95,  105  Am. 
St.  201,  decided  in  1904,  where  the  action  was  for  an 
injunction  to  prevent  the  purchase  of  stock  in  a  water- 
works company  or  the  erection  of  water-works  by  the 
town  of  Waterloo  itself  because  in  doing  so  the  town 
would  exceed  its  debt  limit,  the  court  makes  a  clear 
distinction  between  the  expense  of  providing  water 
and  light  for  public  purposes,  which  is  generally  re- 
garded as  a  necessary  expense,  and  the  ownership 
and  operation  of  a  plant  for  the  purpose  of  providing 
water  and  light,  which  expense  is  regarded  as  extra- 
ordinary in  the  sense  that  the  municipality  will  not 
be  permitted  to  exceed  the  debt  limit  in  procuring  it, 
the  court  saying:  "While  the  expense  of  water  and 
light  for  pubHc  use  in  a  town  or  city  is  an  ordinary 
and  necessary  expense,  the  construction  of  a  water- 
works or  electric  light  plant  by  such  town  or  city  is 
not  in  any  sense  an  ordinary  and  necessary  expense, 
but  an  extraordinary  one.  There  is  a  clear  and  plain 
distinction  between  a  contract  for  water  and  light  for 
public  use  and  one  for  the  construction  of  a  water  and 
light  plant  to  furnish  the  same.  The  first  is  an  ordi- 
nary and  necessary  expense,  while  the  latter  involves 
municipal  ownership  of  the  water  and  light  plant,  the 
means  of  furnishing  said  water  and  light,  and  is  an 
extraordinary  expense.  It  has  been  correctly  held 
that  municipal  corporations  can  not  evade  restrictions 
upon  their  power  to  become  indebted  by  issuing  their 
bonds,  payable  only  out  of  a  fund  raised  by  a  special 
tax  authorized,  levied,  and  collected  for  that  purpose 
(provided  the  same  are  not  for  special  benefits,  etc.), 
or  payable  only  out  of  the  rentals  or  income  of  a  water 
or  light  plant  or  other  property  owned  by  such  munici- 
pal corporation,  or  by  buying  property  subject  to  liens, 
although  they  do  not  assume  or  agree,  in  terms,  to  pay 
said  liens,  or  by  providing  that  such  liens  shall  be  paid 


107  ^^^"^    LIMITATION.  §  JO 

only  out  of  a  special  fund  raised  by  taxation  for  that 
purpose,  or  only  out  of  the  income  of  such  property." 

§  70.  Instalment  payment  purchase. — In  the  case 
of  Reynolds  v.  Waterville,  92  Maine  292,  42  Atl.  553, 
decided  in  1898,  the  Supreme  Court  of  Maine  refused 
to  permit  the  defendant  city  to  acquire  a  public  utility, 
when  to  do  so  would  exceed  the  debt  limit,  by  paying 
for  the  same  in  instalments  under  a  sort  of  a  rental 
agreement  which  the  court  held  to  be  an  attempt  to 
evade  the  limitation  fixed  by  the  constitution,  the  court 
saying:  "The  constitution  of  this  state  provides  that 
no  city  or  town  shall  create  any  debt  or  liability  which 
singly,  or  in  the  aggregate  with  previous  debts  or 
liabilities,  shall  exceed  five  per  centum  of  the  last 
regular  valuation  of  said  city  or  town.  ...  It 
would  not  be  a  misinterpretation  to  say  that  the  city 
of  Waterville,  instead  of  leasing  the  property,  under- 
takes to  purchase  or  pay  for  it  on  the  instalment  plan, 
and  that  what  are  called  rentals  for  the  hall  are  merely 
partial  payments  on  its  cost.  ...  It  must  be 
confessed  that  the  act  in  question  is  a  very  dexterous 
attempt  to  accomplish  one  thing  under  the  name  of 
another  thing — as  plausible  as  it  is  fallacious.  .  .  . 
It  is  sure,  however,  if  the  plan  here,  intended,  as  it  is, 
to  avoid,  rather  than  uphold,  the  law,  shall  prevail, 
the  result  as  a  precedent  will  shatter  the  constitutional 
amendment  into  pieces." 

§  71.  Purchase  of  encumbered  property. — In  the 
case  of  Browne  v.  Boston,  179  Mass.  321,  60  N.  E.  934, 
decided  in  1901,  the  Supreme  Court  of  Massachusetts 
refused  to  find  power  in  the  city  of  Boston  to  purchase 
certain  land  subject  to  large  encumbrances  for  the 
payment  of  which  it  was  expressly  provided  in  the 
agreement  the  city  should  not  be  liable.     The   court 


§  71  PUBLIC    UTILITIES.  I08 

looking  at  the  substance  of  the  agreement  and  disregard- 
ing its  form  found  that  the  city  was  actually  liable  for 
the  entire  price  including  the  encumbrance  because  the 
property  would  be  taken  from  the  city  to  satisfy  such 
encumbrance  if  it  remained  unpaid.  The  court  in  the 
course  of  its  decision  spoke  as  follows :  "That  board 
made  an  arrangement  with  the  owners  of  the  land 
'by  which  the  city  of  Boston  agreed  to  buy  in  the 
manner  hereinafter  described,  and  the  owners  to  sell, 
said  parcels  for  the  following  prices.'  Then  follows 
a  statement  of  the  price  per  foot  of  each  of  the  dif- 
ferent parcels,  amounting  in  all  to  $226,000.  It  was 
arranged  with  the  owners  of  the  land  that  they  should 
mortgage  the  same  to  third  parties  for  $202,000,  pay- 
able, with  interest,  after  three  years  from  the  con- 
veyance to  the  city,  with  a  privilege  reserved  in  the 
mortgages  to  the  owners,  their  grantees  and  assigns, 
to  pay  the  mortgages  and  interest  at  maturity,  or 
earlier  if  they  should  so  desire.  These  mortgages 
were  to  be  placed  on  the  land  before  it  was  conveyed 
to  the  city,  and  it  was  arranged  that  the  land  should 
be  conveyed  subject  to  them,  but  that  the  city  should 
not  be  mentioned  in  them,  and  that  the  deeds  should 
contain  the  statement  that  the  city  was  not  to  be  held 
liable  in  any  way  for  the  payment  of  the  mortgages, 
or  the  interest  thereon.  ...  It  is  true  that  no 
action  could  be  maintained  against  the  city  for  the 
balance  of  the  purchase  price,  and  that  in  that  sense 
the  city  would  not  be  indebted  for  such  balance.  But 
the  property,  when  conveyed,  will  be  subject  to  the 
mortgages  that  have  been  placed  upon  it  pursuant 
to  the  arrangement  that  has  been  made,  and  the  city 
either  will  have  to  pay  them,  or  submit  to  have  the 
property  taken  from  it  by  foreclosure  proceedings.  It 
will  thus  become  indirectly  liable  for  the  amount 
secured    by    the    mortgages,    and    the    taxpayers    will 


I09  DEBT    LIMITATION.  §  72 

ultimately  be  obliged  to  pay  it  as  contemplated.  In  a 
sense,  therefore,  it  might  be  said,  if  this  arrangement 
were  carried  out,  that  the  city  would  be  indebted  for 
the  sums  secured  by  the  mortgages.  Certainly,  no 
account  of  its  assets  and  liabilities  would  be  correct 
which  omitted  this  property  from  the  one  and  the 
amount  for  which  it  was  mortgaged  from  the  other. 
Moreover,  there  is  authority  for  the  proposition  that, 
if  the  city  had  itself  mortgaged  the  property,  and  had 
stipulated  in  the  mortgages  that  it  should  not  be  liable, 
but  that  the  mortgagees  should  look  to  the  land  alone, 
such  a  transaction  would  be  within  the  prohibition 
of  the  statute,  and  would  not  be  upheld.  Mayor,  &c.  v. 
Gill,  31  Md.  375;  Earles  v.  Wells,  94  Wis.  285,  68  N. 
W.  964,  59  Am.  St.  886. 

"The  object  of  the  statute  is  to  protect  the  taxpayer 
by  confining  the  indebtedness  of  the  city  within  a  pre- 
scribed limit.  The  manner  in  which  the  indebtedness 
is  created  is  immaterial,  if  the  result  is  to  subject  the 
city  to  a  present  liability,  direct  or  indirect,  which 
the  taxpayers  eventually  will  be  called  on  to  meet.  It 
seems  to  us  that  such  will  be  the  result  of  the  ingen- 
ious scheme  that  has  been  devised  in  the  present  case. 
We  think  that  the  statute  can  not  be  evaded  in  the 
manner  proposed.  Ironwood  Waterworks  Co.  v.  Iron- 
wood,  99  Mich.  454,  58  N.  W.  371 ;  Mayor,  &c.  v.  Gill, 
supra;  Newell  v.  People,  7  N.  Y.  9;  Reynolds  v.  Water- 
ville,  92  Maine  292,  42  Atl.  553 ;  Earles  v.  Wells,  94 
Wis.  285,  68  N.  W.  964.  59  Am.  St.  886." 

§  72.  Contract  obligations  payable  in  future. — In 
the  case  of  Levy  v.  McClellan,,  196  N.  Y.  178,  89  N. 
E.  569,  decided  in  1909,  the  court  of  New  York  found 
that  the  term  "city  indebtedness"  included  contract 
obligations  of  a  fixed  amount  to  be  paid  for  certain 
improvements  to  be  made  in  the  future,  the  court  say- 


§  73  PUBLIC   UTILITIES.  I  lO 

ing:  "I  refer  to  the  question  of  whether  certain  out- 
standing contracts,  validly  entered  into  by  the  city  for 
public  improvements,  should  be  regarded  as  an  exist- 
ing indebtedness  within  the  purview  of  the  constitu- 
tion. There  were  on  June  30,  1908,  such  contracts, 
which  obligated  the  city  to  an  amount  estimated  to  be 
in  excess  of  $54,000,000,  and  except  as  to  the  amount 
which  had  been  earned  upon  them,  which  is  stated  to 
have  been  on  that  day  $2,553,933.92,  the  referee  has 
refused  to  include  that  sum  as  an  indebtedness.  I 
think  the  referee  was  in  error." 

§  73.  Encumbering  property  before  sale  to  mu- 
nicipality.— The  case  of  Evans  v.  Holman,  244  111.  596, 
91  N.  E.  ^2}^,  decided  in  1910,  is  similar  in  principle  to 
the  one  cited  in  Browne  v.  Boston,  supra.  The  case 
involved  an  attempt  to  purchase  an  electric  light  plant 
by  evading  the  constitutional  debt  limit  by  means  of 
mortgaging  the  plant  to  the  extent  of  the  excess 
amount  with  the  provision  in  the  contract  of  purchase 
that  the  municipality  was  not  to  assume  or  agree  to 
pay  the  mortgage  indebtedness.  The  court  held  that 
this  was  merely  a  device  to  avoid  the  constitutional 
limitation,  for  in  effect  the  city  would  be  obliged  to 
pay  the  mortgage  indebtedness  or  lose  the  property 
so  that  the  amount  of  this  indebtedness  was  really  a 
liabiHty  assumed  by  the  city  by  virtue  of  the  attempt 
to  purchase  the  property  since  the  property  was 
pledged  to  its  payment. 

§  74.  Debts  payable  out  of  special  fund. — The  case 
of  People  ex  rel.  Schwon  v.  Chicago  &  Alton  R.  Co., 
253  111.  191,  97  N.  E.  310,  decided  in  191 1,  holds  that 
so  long  as  the  bonds  creating  the  debt  are  bonds  issued 
by  the  city,  the  obligation  is  a  municipal  indebtedness 
although    their   payment   was    provided    for    out    of    a 


Ill  DEBT    LIMITATION.  §75 

Special  fund,  since  as  the  court  holds  all  bonds  issued 
by  a  municipal  corporation  are  in  effect  payable  out 
of  a  special  fund. 

The  same  court  in  the  case  of  Joliet  v.  Alexander, 
194  111.  457,  62  N.  E.  861,  decided  in  1902,  observes 
that:  "We  see  no  difference  between  mortgaging 
the  public  buildings  and  property  of  the  city  and 
mortgaging  its  system  of  water-works.  .  .  .  The 
constitution  makes  no  distinction  in  the  nature  of  the 
power  exercised  with  reference  to  contracting  indebt- 
edness, but  the  prohibition  is  against  increasing  in- 
debtedness, in  any  manner  or  for  any  purpose,  beyond 
the  limit  fixed." 

§  75.  Bonds  payable  from  revenue  of  plant. — This 
court  in  East  Aloline  v.  Pope,  224  111.  386,  79  N.  E. 
587,  decided  in  1906,  also  refused  to  sustain  the  lia- 
bility of  a  municipality  on  the  bonds  issued  in  con- 
nection with  the  purchase  of  a  system  of  water-works 
which  were  to  be  paid  out  of  the  net  revenue  of  the 
water-works  and  a  special  tax  if  the  revenue  from  the 
water-works  was  insufficient  for  that  purpose.  As 
the  court  expressed  it:  'Tf  it  were  otherwise,  the 
legislature  could  authorize  the  issuance  of  bonds  for 
any  proper  municipal  purpose  in  any  amount,  to  be 
paid  out  of  a  tax  levied  for  the  special  purpose  of 
paying  them,  and  thereby  render  nugatory  the  con- 
stitutional provision  limiting  municipal  indebtedness." 

In  the  case  of  Schnell  v.  Rock  Island,  232  111.  89, 
83  N.  E.  462,  14  L.  R.  A.  (N.  S.)  874,  decided  in  1907, 
the  Supreme  Court  of  Illinois  refused  to  hold  valid, 
certificates  payable  out  of  the  water  fund  and  the 
special  taxes  which  might  be  annually  levied  and  made 
available  for  the  purpose  although  the  fund  to  be 
derived  from  the  sale  of  such  certificates  was  intended 
to  be  used  in  the   extension  and   enlargement  of  the 


§76  PUBLIC    UTILITIES.  112 

water-works  system.  In  the  course  of  its  opinion  the 
court  observed:  "In  this  case  the  entire  proceeds  of 
the  existing  water-works  system  were  pledged  to 
secure  payment  of  the  certificates,  and  they  created  an 
indebtedness  against  the  city."  The  court,  however, 
conceded  that:  "A  city  may  acquire  a  system  of 
water-works  by  pledging  the  income  until  it  shall 
pay  for  the  system,  and  no  indebtedness  is  created. 
The  same  rule  might  apply  to  some  definite  extension 
of  water-works  where  the  income  of  the  extension 
could  be  separated  and  applied  to  payment;  but  an 
obligation  to  pay  with  the  income  of  property  already 
owned  by  a  city  is  not  different  from  an  obligation  to 
pay  with  any  other  funds,  so  far  as  the  question 
whether  the  transaction  amounts  to  a  debt  is  con- 
cerned." 

§  76.  "Mueller  law"  certificates. — This  same  court 
in  the  case  of  Lobdell  v.  Chicago,  227  111.  218,  81  N. 
E.  354,  decided  in  1907,  in  construing  a  statute  gen- 
erally known  as  the  "Mueller  law"  which  was  an  act 
to  authorize  cities  to  own  and  operate  or  lease  street 
railways  and  to  provide  the  necessary  revenue  there- 
for, held  that  such  street  railway  certificates  when 
issued  created  an  indebtedness  of  the  city  within  the 
constitutional  limitation,  the  court  expressing  its  deci- 
sion as  follows:  "It  is  too  clear  for  argument  that 
under  the  statute,  the  ordinance  of  January  18  and  the 
trust  deed  or  mortgage  the  use  of  the  streets  for  street 
railway  purposes  is  to  be  mortgaged  for  the  benefit 
of  the  holders  of  said  street  railway  certificates  for  the 
period  of  twenty  years  after  a  sale  shall  be  made  if 
the  trust  deed  or  mortgage  is  foreclosed;  and,  if  the 
right  to  this  use  of  the  streets  of  the  city  is  property, 
then  the  trust  deed  given  to  secure  the  payment  of 
the  $75,000,000  street  railway  certificates  proposed  to 


113  DEBT    LIMITATION.  ^  jy 

be  issued  is  something  more  than  a  purchase-money 
mortgage,  and,  within  the  doctrine  of  the  Alexander 
and  Pope  Cases  (62  N.  E.  861,  79  N.  E.  587),  these 
certificates,  when  issued  and  sold,  and  the  trust  deed 
or  mortgage  given  to  secure  them,  will  create  an  in- 
debtedness of  the  city  within  the  constitutional  pro- 
hibition. .  .  .  This  court  has  nothing  to  do  with 
the  policy  of  the  municipilization  of  street  railways 
in  the  cities  of  this  state." 

§  77.  Purchase  price  payable  only  out  of  revenue 
of  plant. — In  the  case  of  Winston  v.  Spokane,  12 
Wash.  524,  41  Pac.  888,  decided  in  1895,  the  water- 
works were  purchased  with  the  understanding  that 
payment  of  the  obligations  issued  therefor  should  be 
made  only  out  of  the  receipts  of  the  water-works  sys- 
tem and  that  the  city  should  not  be  liable  to  make  any 
payment  other  than  from  this  special  fund.  In  sus- 
taining the  contract  of  purchase  and  holding  that  the 
purchase  price,  which  was  to  be  paid  only  out  of  the 
revenues  derived  from  the  operation  of  the  water- 
works system,  did  not  constitute  a  municipal  indebted- 
ness the  court  observed:  "For  the  purpose  of  this 
case,  it  must  be  conceded  that  said  water-works  will, 
in  addition  to  supplying  the  money  for  the  creation 
of  such  fund,  as  provided  for  in  said  ordinance,  pay 
all  the  expenses  incident  to  their  operation,  and  for 
that  reason  the  creation  of  such  special  fund  can 
occasion  no  liability  upon  the  part  of  the  city  to  make 
any  payment  out  of  its  general  funds.  This  being  so, 
we  are  of  the  opinion  that  neither  the  ordinance,  the 
contract,  nor  the  obligations  to  be  issued  by  the  city 
in  pursuance  thereof,  do  or  will  constitute  a  debt  of 
the  city,  within  the  constitutional  definition.  The  only 
obligation  assumed  on  the  part  of  the  city  is  to  pay  out 
of  the  special  fund,  and  it  is  in  no  manner  otherwise 

8— Pub.  Ut 


§78  PUBLIC    UTILITIES.  1 14 

liable  to  the  beneficiaries  under  the  contract.  The 
general  credit  of  the  city  is  in  no  manner  pledged, 
except  for  the  performance  of  its  duty  in  the  creation 
of  such  special  fund.  The  transaction,  therefore,  is  no 
more  the  incurring  of  an  indebtedness  on  the  part  of 
the  city  than  is  the  issue  of  warrants  payable  out  of 
a  special  fund  created  by  an  assessment  upon  property 
to  be  benefited  by  a  local  improvement." 

§  78.  Payment  same  as  by  "special  assessments." 
— As  there  was  no  actual  additional  liability  created 
against  the  city  by  virtue  of  the  purchase  of  this  water- 
works system  since  it  was  to  pay  for  itself,  the  court 
permitted  the  contract  of  purchase  to  be  consummated 
although  the  purchase  would  have  caused  the  city  to 
exceed  its  constitutional  debt  limit  had  the  purchase- 
price  been  regarded  as  a  city  indebtedness.  The  court 
based  its  decision  by  analogy  on  the  principle  involved 
in  the  law  of  special  assessment  on  abutting  property 
in  connection  with  the  improvement  of  a  street  or  pub- 
lic highway,  in  which  case,  of  course,  there  is  no 
liability  primarily  on  the  part  of  the  city,  but  only  an 
undertaking  to  see  that  the  property  adjoining  the 
improvement  is  assessed  for  the  payment  of  such  an 
improvement.  This  principle  is  generally  applied  to 
and  is  well  illustrated  by  the  so-called  park-land  pur- 
chases, where  the  title  to  land  for  park  purposes  is 
taken  by  the  city  and  a  mortgage  given  to  secure  the 
payment  of  the  purchase  price  on  condition  that  there 
be  no  other  or  general  liability  of  the  municipality 
to  pay  said  mortgage  indebtedness  except  from  funds 
raised  by  special  assessments  on  the  adjoining  prop- 
erty on  account  of  the  benefits  accruing  to  it  by  virtue 
of  the  use  of  the  land  for  park  purposes. 

§  79.  Park-land  purchase  certificates. — This  rule 
is  well  stated  and  illustrated  in  the   case   of   Kelly  v. 


115  ^^^"^    LIMITATION.  §80 

Minneapolis,  63  Minn.  125,  65  N.  W.  115,  30  L.  R.  A. 
281,  decided  in  1895,  as  follows:  "And  said  board  may- 
accept  title  to  lands  and  give  back  a  mortgage  or 
mortgages  in  the  name  of  said  city,  with  or  without 
bonds  to  secure  the  unpaid  purchase-price,  provided, 
that  no  personal  or  general  liability  on  the  part  of  said 
city  shall  be  created  by  any  such  contract,  or  mort- 
gage, or  bond  beyond  the  means  at  the  time  available 
therefor,  except  the  liability  to  pay  such  amounts  as 
may  be  realized  from  benefits  assessed  on  benefited 
property  on  account  of  the  lands  included  in  such  con- 
tract or  mortgage.  And  it  is  hereby  made  the  duty  of 
said  board  to  pay  on  each  such  contract  or  mortgage 
an  amount  equal  to  the  sum  or  sums  so  realized  from 
such  assessments.  .  .  ,  The  certificates  in  question 
were  given  for  the  purchase  price  of  land  for  park 
purposes,  and  their  payment  secured  by  a  mortgage 
on  the  land  purchased.  .  .  .  *It  being  expressly 
understood  and  agreed  that  there  is  no  liability  on 
the  part  of  said  city  to  pay  the  amount  evidenced  by 
this  certificate,  secured  by  the  above-described  mort- 
gage, out  of  any  other  fund  than  the  fund  above 
specified.'  .  .  .  Each  certificate  is  a  lien  merely 
upon  the  particular  land  for  the  agreed  purchase-price 
of  which  it  was  given,  not  upon  any  property  which 
the  city  previously  owned.  .  .  .  The  debt  of  the 
city  is  neither  increased  nor  diminished  by  the  trans- 
action. .  .  .  In  no  event,  nor  under  any  circum- 
stances, is  the  city  liable,  except  as  a  trustee,  to  pay 
over  to  the  certificate  holder  the  amount  actually  real- 
ized from  the  assessments." 

§  80.  Option  agreements  of  purchase. — Where  the 
agreement  is  in  the  form  of  an  option  taken  by  a  city 
under  which   it    may   purchase   the   land   at   the   price 


§  8l  PUBLIC    UTILITIES.  1X6 

then  agreed  upon  some  time  in  the  future  if  it  so  de- 
sires, but  otherwise  it  is  under  no  obhgation  and  may 
refuse  to  exercise  its  option,  which  is  the  case  of  Per- 
rigo  V.  Milwaukee,  92  Wis.  236,  65  N.  W.  1025,  de- 
cided in  1896,  the  court  in  sustaining  such  a  contract 
and  holding  that  it  did  not  create  municipal  indebted- 
ness, said:  "But  each  of  the  legislative  enactments 
mentioned  expressly  provides  that  such  purchase,  or 
agreement  to  purchase,  should  be  'without  creating 
any  corporate  liabilities  therefor;'  and  the  agreement 
expressly  provides  that  the  same  should  'not  create 
any  corporate  liability  against'  the  city  'in  any  manner 
or  form,'  and  that  the  Perrigos  would  'not  claim  any 
corporate  liabihty  against'  the  city  'by  reason  thereof.' 
.  .  .  Does  this  optional  agreement  held  by  the  city 
create  a  debt  against  the  city  and  in  favor  of  the  Per- 
rigos? Certainly  not,  since,  as  indicated,  it  expressly 
provides  that  the  city  shall  not  thereby  be  made  liable 
in  any  manner  or  form.  .  .  .  The  further  payment 
by  the  city  of  any  portion  of  the  purchase  price  or 
interest  or  taxes  is  entirely  optional  with  the  city." 

§  81.  Option  to  purchase  water- works. — The  Su- 
preme Court  of  Wisconsin  in  the  case  of  Connor  v. 
Marshfield,  128  Wis.  280,  107  N.  W.  639,  decided  in 
1906,  applied  this  principle  to  the  purchase  of  a  water- 
works system,  giving  its  decision  in  the  following  lan- 
guage :  "The  distinguishing  element,  as  then  defined, 
consisted  in  the  fact  that  the  city  could  not  be  coerced 
by  the  creditor  of  its  grantor  into  applying  to  his 
claim  either  its  general  revenue  or  property  owned  by 
it  at  the  time  of  the  contract,  but  was  free  at  its  elec- 
tion to  abandon  the  plan  of  acquiring  or  holding  that 
which,  prior  to  the  contract,  it  did  not  own.  This 
distinction  between  conferring  upon  another  power  to 
take,  in  invitum,   either  general  municipal  revenue  or 


117  DEBT    LIMITATION.  §82 

property  owned  by  the  city  prior  to  the  contract,  and 
a  right  merely  to  retake  the  property  which  is  ac- 
quired by  the  contract  or  the  earnings  or  proceeds 
thereof,  is  sustained  in  many  decided  cases.  .  .  . 
We  can  discover  no  vaHd  distinction  between  the 
Park-Land  Cases  and  the  present  situation.  In  both, 
the  legislature  had,  to  the  extent  of  its  power,  author- 
ized the  transactions,  had  declared  that  the  city  should 
be  under  no  legal  liability,  and  that  the  burden  on  the 
property  should  not  be  deemed  indebtedness  within 
the  constitutional  limitation.  Under  no  circumstances 
could  the  holders  of  these  bonds  recover  any  money 
judgment  against  the  city  for  their  principal.  Nor  is 
any  property  formerly  owned  by  the  city  subjected  to 
seizure  by  the  bondholders.  True,  by  enforcing  their 
right  to  take  away  the  v^ater  and  lighting  plant  they 
may  deprive  the  city  of  so  much  of  its  money  as  up 
to  that  time  has  been  paid  upon  the  purchase,  but 
the  same  was  true  as  to  the  park  lands.  .  .  .  As  to 
the  hydrant  rentals,  respondents  concede  that  this 
court  has  adopted  the  doctrine  that  a  promise  to  pay 
for  prospective  services  as  they  are  performed,  or  in- 
stallments of  interest  for  future  forbearance  of  money, 
does  not  constitute  any  indebtedness  until  each  in- 
stallment  becomes  due." 

§  82.  Purchase  of  an  electric  light  plant. — The 
case  of  Overall  v.  Madisonville,  125  Ky.  684,  102  S. 
W.  278,  12  L.  R.  A.  (N.  S.)  433.  decided  in  1907, 
furnishes  a  unique  illustration  of  the  practical  appli- 
cation of  the  rule  permitting  a  city  to  purchase  for  it- 
self an  electric  light  system  by  piecemeal,  since  its 
indebtedness  was  too  great  to  permit  the  purchase 
outright.  Section  157  of  the  Constitution  of  Ken- 
tucky, which  controls  the  decision,  provides  in  part 
that   "no   county,   city,   town,  taxing  district   or   other 


§83 


PUBLIC    UTILITIES. 


ii8 


municipality  shall  be  authorized  or  permitted  to  be- 
come indebted  in  any  manner  or  for  any  purpose  to 
an  amount  exceeding  in  any  year  the  income  and 
revenue  provided  for  such  year."  By  a  series  of  con- 
tracts the  defendant  city  purchased  different  parts  of 
the  electric  light  plant  at  different  times,  paying  cash 
out  of  the  current  revenue  of  that  year  in  each  case 
and  taking  title  to  the  particular  part  as  provided  for 
by  the  contract  in  question.  In  sustaining  the  con- 
tracts and  commending  the  practice  of  cash  payment, 
the  court  said :  "In  this  way  the  city  has  contracted 
no  debt  beyond  its  current  revenues.  It  agreed  to  pay 
cash  and  has  paid  cash  for  all  it  bought.  It  accom- 
plished this  by  not  buying  more  than  it  had  the  means 
on  hand  or  certainly  then  due  it  to  pay  for  it,  .  .  . 
Appellant  contends  that  the  city  could  not  legally  con- 
tract for  a  light  plant  in  piecemeal.  The  reason  as- 
signed is  that  no  part  of  it  is  valuable  as  a  public 
utility  until  all  of  it  is  assembled.  The  reason  is  not 
satisfying.  .  .  .  The  course  of  appellee  city  in 
buying  only  w^hat  it  could  pay  for,  and  as  it  could 
pay  for  it,  is  one  that  might  be  more  frequently  fol- 
low^ed  with  satisfactory  results  to  taxpayers." 


§  83.  Debt  accrues  as  service  is  furnished  under 
serial  contracts. — The  contract  of  a  municipality  to 
provide  itself  during  a  period  of  years  with  the  con- 
veniences of  pubHc  utilities  to  be  paid  for  in  annual 
payments  in  the  nature  of  rentals  is  generally  regarded 
as  a  necessary  municipal  expense,  and  although  the 
aggregate  amount  payable  during  the  entire  period 
may  exceed  the  debt  limit  fixed  by  the  constitution, 
the  courts  do  not  hold  such  contracts  to  be  invalid  for 
the  reason  that  they  are  not  regarded  as  incurring  the 
entire  indebtedness  at  the  time  the  contract  is  exe- 
cuted, but  that  the  liability  to  pay  annually  during  a 


119  DEBT    LIMITATION.  §84 

series  of  years  makes  the  annual  payment  after  its 
maturity  the  extent  of  the  indebtedness.  A  good 
statement  of  this  rule  which  is  generally  followed  is 
made  in  Anoka  Water  Works,  &c.,  Co.  v.  Anoka,  109 
Fed.  580,  decided  in  1901,  as  follows:  "The  admitted 
facts  show  that  these  works  were  necessary,  and  were 
generally  desired  by  the  inhabitants  of  the  city,  when 
contracted  for,  as  conducive  to  their  health  and  com- 
fort; that  all  the  terms  of  the  contracts  were  reason- 
able, and  entered  into  after  advertising  for  proposals, 
and  considering  all  offers  of  other  parties;  that  the 
privileges  and  franchises  granted  were  necessary  for 
the  construction  and  operation  of  the  works,  and  were 
not  exclusive;  and  that  equitable  provision  was  made 
by  the  contracts  for  the  purchase  of  the  works  by  the 
city,  after  any  interval  of  five  years,  at  the  valuation 
of  the  same  by  appraisal. 

The  objection  that  the  contracts  constituted  the  in- 
currence of  an  indebtedness  on  the  part  of  the  city,  to 
a  prohibited  amount  can  not,  in  reason,  be  sustained. 
It  is  unnecessary  to  examine  in  detail  the  arguments 
presented  in  support  of  this  objection.  It  is  enough  to 
say  that  these  contracts  did  not,  when  entered  into, 
create  an  indebtedness  on  the  part  of  the  city  to  the 
aggregate  amount  of  the  rates  for  water  and  lights 
for  the  thirty-one  years.  The  indebtedness  would  only 
arise  as  the  water  and  lights  were  furnished  and  used; 
and,  if  paid  for  as  agreed,  would  never  exceed  the 
rates  for  six  months." 

§  84.  Necessary  service  payable  from  current  rev- 
enue.— The  case  of  Allison  v.  Chester,  69  W.  Va.  533, 
72  S.  E.  472,  37  L.  R.  A.  (N.  S.)  1042,  decided  in 
191 1,  states  this  rule  and  the  reason  for  it  as  follows, 
after  observing  that  the  great  weight  of  judicial  au- 
thority, including  the  decisions  of  the  Supreme   Court 


§  85  PUBLIC    UTILITIES.  I20 

of  the  United  States,  is  in  accordance  with  it,  and 
that  it  is  in  line  with  the  better  reason:  "In  holding 
that  where  the  contract  or  ordinance  as  in  the  case 
at  bar  is  one  intended  to  provide  for  the  furnishing 
of  a  municipality  with  water  to  be  used  for  public 
purposes,  the  payment  therefor  to  be  made  from  year 
to  year,  such  contract  should  not  be  construed  or 
treated  as  the  creation  of  an  indebtedness  within  the 
inhibition  of  our  constitution  except  as  to  the  amount 
actually  fallen  due,  but  as  a  mode  or  means  of  provid- 
ing for  the  necessary  current  expense  of  the  municipal 
government.  True,  the  revenues  of  succeeding  years 
to  a  certain  extent  become  bound  for  the  future  per- 
formance of  the  contract  and  beyond  the  discretion  of 
the  municipality  to  alter  or  abrogate ;  but  to  supply 
the  water  is  an  absolute  necessity,  indispensable  to 
the  very  existence  of  the  people  and  without  such  au- 
thority to  so  contract  a  municipality  would  be  entirely 
helpless." 

§  85.  Debt  only  created  when  service  furnished. — 
In  the  case  of  Crowder  v.  Sullivan,  128  Ind.  486,  28  N. 
E,  94,  13  L.  R.  A.  647,  decided  in  1891,  the  court 
makes  the  following  excellent  statement  of  this  prin- 
ciple and  indicates  the  practical  reason  upon  which  it 
is  founded:  "Where  a  municipal  corporation  contracts 
for  a  usual  and  necessary  thing,  such  as  water  or 
light,  and  agrees  to  pay  for  it  annually  as  furnished, 
the  contract  does  not  create  an  indebtedness  for  the 
aggregate  sum  of  all  the  yearly  installments,  since  the 
debt  for  each  year  does  not  come  into  existence  until 
the  compensation  for  each  year  has  been  earned.  It 
may  be  true  that  the  contract  creates  an  obligation, 
for  a  breach  of  which  an  action  for  damages  will  lie, 
but  it  does  not  create  a  right  of  action  for  the  un- 
earned   compensation.      The    earning    of    each    year's 


121  DEBT    LIMITATION.  §86 

compensation  is  essential  to  the  existence  of  a  debt. 
If  municipal  corporations  can  not  contract  for  a  long 
period  of  time  for  such  things  as  light  or  water,  the 
result  would  be  disastrous;  for  it  is  matter  of  common 
knowledge  that  it  requires  a  large  outlay  of  money  to 
provide  machinery  and  appliances  for  supplying  towns 
and  cities  with  light  and  water,  and  that  no  one  will 
incur  the  necessary  expense  for  such  machinery  and 
appliances  if  only  short  periods  are  allowed  to  be  pro- 
vided for  by  contract." 

§  86.  Current  service  payable  out  of  current  rev- 
enue.— This  principle  is  clearly  in  accordance  with  the 
weight  of  authority  and  the  better  reason  demanding 
a  more  liberal  construction  of  the  constitutional  lim- 
itation where  the  commodity  to  be  provided  is  prac- 
tically a  necessity  which  can  properly  be  treated  as  a 
current  expense  and  is  therefore  payable  out  of  the 
current  revenue  as  the  particular  commodity  is  fur- 
nished. The  rule  is  in  harmony  with  the  principle  of 
cash  payment  and  accomplishes  the  purpose  of  the 
constitutional  provisions  limiting  the  expenditures  in 
any  given  year  to  the  amount  of  the  revenues  of  that 
year,  and  it  is  of  practically  universal  application  as 
has  already  been  indicated  by  the  decisions  except 
those  of  the  Supreme  Court  of  Illinois,  which  have 
been  discussed,  and  that  of  Georgia  in  the  case  of 
Dawson  v.  Dawson  Waterworks  Co.,  io6  Ga.  696,  32 
S.  E.  907,  where  the  Supreme  Court  of  Georgia  takes 
the  contrary  and  rather  unique  position  that  while  a 
contract  for  water  service  for  twenty  years  is  illegal 
and  invalid  because  in  making  it  the  plaintiff  city  ex- 
ceeded its  debt  limit,  the  city  is  liable  for  such  service 
for  the  first  year  and  for  any  succeeding  year  it  may 
accept  service  under  the  contract,  which  accordingly 
remained    effective    until    repudiated    by    either    party. 


§  86  PUBLIC    UTILITIES.  122 

In  the  course  of  its  opinion,  after  conceding  that  it  is 
opposed  by  the  Supreme  Court  of  the  United  States 
in  the  case  of  Walla  Walla  v.  Walla  Walla  Water 
Co.,  172  U.  S.  I,  43  L.  ed.  341,  and  by  the  great  weight 
of  the  authorities,  the  court  says:  "If  we  are  correct 
in  these  conclusions,  then  the  contract  under  consid- 
eration in  the  present  case  created  a  'debt,'  within  the 
meaning  of  the  constitution,  the  aggregate  amount  of 
which  was  the  sum  of  the  annual  rentals  therein  stip- 
ulated to  be  paid;  and  it  is  therefore  illegal,  and  not 
binding  except  for  the  first  year  in  which  the  contract 
was  entered  into,  and  for  any  subsequent  years  in 
which  the  municipality  sees  proper  to  receive  at  the 
hands  of  the  water-works  company  the  benefit  which 
the  city  might  derive  from  the  contract." 


CHAPTER  VII. 

THE  FRANCHISE. 

Section. 

87.  Grant  by  state  of  charter  right  to  be  a  corporation. 

88.  Special   franchise   right  to  use   streets   and   operate   municipal 

public  utility. 

89.  Power  to  grant   special   franchises   delegated   to   municipality. 

90.  Power  of  municipality  subordinate  to  state. 

91.  Municipal  regulation  by  franchise  provisions. 

92.  The  franchise  a  contract. 

93.  Franchise  grants  on  acceptance  become  contracts. 

94.  Rights  subject  to  public  regulation  and  control. 

95.  Franchise  rights  available  to  inhabitants. 

96.  Franchise  confers  special  privilege. 

97.  Conditions  of  special  franchise  imposed  by  municipality  binding. 

98.  Inhabitants  may  enforce  franchise  provisions. 

99.  Special  franchise  necessary  to  use  of  general  franchise. 

100.  Franchise  rights  of  inhabitant  and  nonresident  distinguished. 

101.  State  control  of  municipal  franchise  grants. 

102.  Power  of  municipality  to  regulate. 

103.  Franchise  rights  follow  growth  of  municipality. 

104.  Rights    not    expressly    granted    are    reserved    to    municipality. 

105.  Duty  of  municipality  in  granting  franchises. 

106.  General  and  special  franchise  defined. 

107.  Franchise  rights  protected  by  court  of  equity. 

108.  All  franchise  rights  subject  to  exercise  of  police  power. 

109.  Franchise  grants  for  benefit  of  inhabitants  primarily. 

110.  Granting  franchise  is  public  and  governmental. 

111.  Municipal   conditions   must   be    reasonable   and    not   arbitrary. 

112.  State  interest  and  regulation  controls  municipal. 

113.  Municipal   regulation   once  provided   is  final   and  binding. 

114.  Municipal    consent    when    accepted    creates    binding    contract. 

115.  Vested    interests   and    contract   rights   not   subject   to   impair- 

ment by  later  constitutional  provisions. 

116.  Franchise  rights  may  be  modified  by  mutual  agreements. 

§  87.     Grant  by  state  of  charter  right  to  be  a  cor- 
poration.— The   right   of   a   corporation   providing  mu- 
123 


§  88  PUBLIC   UTILITIES.  1 24 

nicipal  public  utility  service  to  be  a  body  corporate  is 
a  special  privilege  w^hich  does  not  belong  to  the  people 
at  large  or  to  any  individual  or  group  of  citizens  as  a 
natural  right,  and  is  commonly  knov^n  as  a  charter 
franchise.  This  franchise  right  or  privilege  to  be  a 
corporation  is  conferred  by  the  state  in  the  form  of 
a  charter  granting  the  privileges  especially  provided 
by  the  charter  itself,  and  is  usually  described  as  the 
general  franchise  or  charter  right  to  be  a  separate 
legal  entity,  and  to  exist  as  a  body  corporate. 

§  88.  Special  franchise  right  to  use  streets  and 
operate  municipal  public  utility. — The  right  to  install, 
maintain  and  operate  a  municipal  public  utility  plant 
and  to  enjoy  the  special  privilege  of  occupying  and 
using  the  streets  within  the  particular  municipality 
necessary  to  provide  its  service  must  also  be  specially 
granted,  and  such  rights  and  privileges  when  conferred 
are  commonly  known  as  a  special  franchise,  which  is 
granted  either  by  the  state  or  more  frequently  by  the 
municipality  acting  under  authority  delegated  to  it  for 
that  purpose  by  the  state.  As  all  corporations,  includ- 
ing municipalities  and  those  organized  for  the  purpose 
of  providing  municipal  public  utilities,  derive  all  their 
power  from  their  creator,  the  state,  which  also  pri- 
marily has  absolute  control  of  all  highways  within  its 
territory,  including  the  streets  of  the  municipality,  it 
necessarily  follows  that  all  power  to  be  a  body  cor- 
porate as  well  as  all  the  rights  and  privileges  of  pro- 
viding public  utility  service  in  municipalities  comes 
from   the  state. 

§  89.     Power  to  grant  special  franchises  delegated 

to  municipality. — The  streets  of  municipal  corporations 
as  well  as  all  highways  within  the  state  are  perma- 
nently dedicated  and  devoted  to  the  use  of  the  general 


125  THE   FRANCHISE.  §  QO 

public  for  transportation  and  communication.  The 
state,  however,  acting  through  its  legislature  and  in 
some  instances  by  constitutional  provision,  has  dele- 
gated to  the  municipality  the  power  to  grant  the 
special  privilege  or  franchise  which  is  necessary  to 
provide  municipal  public  utility  service.  The  control 
vested  in  the  municipality  over  its  streets  is  limited  and 
defined  by  the  statutory  provisions  delegating  to  it  the 
right  to  grant  such  privileges  as  are  necessary  and 
proper  for  the  operation  of  the  public  utility  systems 
on  such  terms  and  conditions  as  the  municipahty  sees 
fit  to  impose,  within  the  power  delegated  to  it  and  sub- 
ject at  all  times  to  the  requirement  that  the  streets 
shall  continue  to  serve  the  public  as  the  means  of 
travel  and  communication.  And  in  all  cases  where  the 
consent  of  the  municipality  is  required  by  constitu- 
tional provision  or  statute  before  the  municipal  public 
utility  may  maintain  and  operate  its  plant,  the  munici- 
pality in  question  may  impose  such  terms  and  condi- 
tions in  connection  with  the  granting  of  its  consent  as 
are  reasonable  and  necessary. 

§  90.  Power  of  municipality  subordinate  to  state. 
— Unless  the  constitution  provides  that  the  consent  of 
the  city  must  be  obtained  before  a  municipal  public 
utility  may  install  and  operate  its  plant,  the  legisla- 
ture may  impose  additional  terms  and  conditions  and 
modify  or  revoke  the  conditions  imposed  by  the  mu- 
nicipality, because  the  power  which  has  been  dele- 
gated to  the  municipality  may  be  recalled  at  any  time 
subject  only  to  the  constitutional  provisions  and  to  the 
rights  guaranteed  thereby.  And  when  the  legislature 
has  made  certain  regulations  for  the  use  of  the  streets 
of  the  municipality  by  the  corporation  providing  mu- 
nicipal public  utilities,  the  municipality  in  question 
under  its  delegated  power  to  regulate  can  not  impose 


§  91  PUBLIC    UTILITIES.  126 

other  conditions  which  are  inconsistent  with  those  al- 
ready provided  by  the  state.  The  municipality  is  act- 
ing as  an  agent  of  the  state  in  the  exercise  of  delegated 
power  and  is  subject  to  the  will  of  the  state  and  can 
place  no  limitations  or  conditions  upon  the  corpora- 
tion inconsistent  with  those  which  have  already  been 
imposed  by  the  state  itself.  The  nature  and  extent  of 
the  powers  of  municipal  corporations  in  this  connec- 
tion necessarily  varies  and  is  determined  by  the  stat- 
ute in  any  particular  case  granting  the  power,  and 
when  the  grant  is  in  general  terms  and  free  from 
restrictions  the  courts  have  permitted  the  city  to  im- 
pose any  restriction  or  condition  which  is  necessary 
or  proper  in  the  particular  case  including  the  limitation 
of  the  franchise  period  as  well  as  the  stipulation  in 
detail  for  the  regulation  of  the  service  to  be  rendered. 
This  power  of  the  city  is  public,  governmental  and 
legislative  rather  than  private  or  proprietary,  however, 
and  is  subject  at  all  times  to  the  proper  exercise  of  the 
police  power  as  a  means  of  regulating  the  service  ren- 
dered in  the  operation  of  the  particular  system  pro- 
viding the  municipal  public  utility  service  in  question. 

§  91.     Municipal  regulation  by  franchise  provisions. 

— Provisions  for  controlling  and  regulating  the  service 
must  necessarily  be  provided,  if  ever  adequately,  when 
the  franchise  privileges  to  become  a  corporation  and 
to  make  such  use  of  the  streets  as  is  necessary  to 
provide  the  public  utility  service  in  question  are 
granted.  For  unless  these  special  privileges  are  made 
the  consideration  for  subjecting  the  grantees  to  the 
proper  regulation  and  control,  and  unless  this  is  spe- 
cifically stipulated  in  the  charter  or  franchise,  there  is 
no  other  adequate  means  of  regulating  the  service  and 
controlling  the  corporation  providing  it,  aside  from 
the  police  power,  whose  scope  is  as  uncertain  as  it  is 


127  THE   FRANCHISE.  §  92 

elastic.  Municipal  corporations  are  finally  recognizing 
the  fact  that  the  proper  time  and  the  only  real,  definite 
opportunity  afforded  to  impose  conditions  for  the 
service  to  be  rendered  as  a  consideration  for  the  grant- 
ing of  such  special  privileges  is  at  the  time  of  the  grant 
and  in  connection  therewith. 

§  92.  The  franchise  a  contract. — That  public  reg- 
ulation and  control  of  the  corporation  providing  such 
service  is  the  only  means  by  which  proper  service  at 
reasonable  rates  can  be  secured  because  competition 
is  not  a  sufficient  force  to  control  a  natural  monopoly 
will  be  discussed  later.  The  nature  of  the  rights  which 
the  municipal  public  utility  enjoys  under  and  by  virtue 
of  the  franchise  privileges  conferred  upon  it  in  connec- 
tion with  its  incorporation  and  the  grant  of  the  right 
to  use  the  streets  for  the  installation  and  operation  of 
its  system  providing  municipal  public  utility  service  is 
the  point  now  under  discussion;  and  it  is  the  general 
rule  that  the  granting  of  such  special  privileges  by 
the  state  or  municipality  acting  under  proper  authority 
and  their  acceptance  by  the  municipal  public  utility 
constitutes  a  valid  contract  which  can  not  be  impaired 
unless  the  grant  is  made  subject  to  the  power  of  the 
municipal  corporation  or  the  state  to  alter,  amend  or 
repeal  it.  The  rights  which  are  thus  created  are  pro- 
tected by  the  constitutional  provision  prohibiting  the 
impairment  of  contract   rights  or  vested   interests. 

§  93.  Franchise  grants  on  acceptance  become  con- 
tracts.— The  grant  by  the  state  of  the  right  to  be  a 
body  corporate  as  well  as  the  special  franchise  privi- 
lege conferred  directly  or  by  delegation  through  the 
municipal  corporation  of  the  right  to  own  and  operate 
a  municipal  public  utility  system  in  the  streets  of  the 
municipality,  when  accepted  and  acted  upon  by  the 
corporation,  constitutes  a  contract  equally  binding 
upon  the  state  and  the  municipality  and  creates  vested 


§  94  PUBLIC    UTILITIES.  1 28 

property  interests  which  can  not  be  impaired  or  de- 
stroyed unless  the  power  to  do  so  is  reserved  as  a 
condition  of  the  grant;  except  in  so  far  as  the  poHce 
power -permits  of  the  regulation  of  the  use  and  enjoy- 
ment of  the  rights  so  granted  in  the  interest  of  the 
public  health  and  the  general  welfare,  to  which  the 
exercise  of  all  powers  and  the  enjoyment  of  all  rights 
are  naturally  subject. 

§  94.  Rights  subject  to  public  regulation  and  con- 
trol.— This  rule  has  been  generally  recognized  since 
the  Dartmouth  College  Case,  4  Wheat.  518;  but  in  so 
far  as  the  business  of  providing  municipal  utilities  is 
public  and  concerns  all  the  people  of  the  state  or  mu- 
nicipality, it  has  been  regarded  as  affected  with  a 
public  interest  and  subject  to  public  regulation  and 
control  under  the  doctrine  of  the  case  of  Munn  v. 
People  of  Illinois,  94  U.  S.   113,  24  L.  ed.  yj. 

§  95.  Franchise  rights  available  to  inhabitants. — 
That  the  right  to  be  a  corporation  and  to  conduct  the 
business  of  providing  the  inhabitants  of  municipalities 
with  the  service  of  municipal  public  utilities  when 
granted  by  the  proper  authorities  and  accepted  by  the 
corporation  constitutes  a  valid  contract  between  the 
parties  concerned,  available  to  and  for  the  benefit  of 
the  citizens  of  the  municipality,  and  that  such  rights 
can  not  be  impaired  because  of  the  constitutional  pro- 
visions protecting  them,  or  altered  or  materially 
changed  unless  the  contract  is  made  subject  to  an  ex- 
press condition  to  that  effect  except  by  the  mutual 
consent  of  the  parties  or  by  the  exercise  of  the  police 
power  is  the  general  rule  as  expressed  and  applied  in 
the   following  leading  cases   on  this   subject.^ 

^  CALIFORNIA.— Los  Angeles  Pac.  Co.  v.  Hubbard,  17  Cal.  App. 
646,  121  Pac.  306;  Piatt  v.  San  Francisco,  158  Cal.  74,  110  Pac.  304; 
Ex  parte  Russell,  163  Cal.  668,  126  Pac.  875;  Pocatello  v.  Murry, 
206  Fed.  72. 


129  THE   FRANCHISE.  §  96 

§  96.  Franchise  confers  special  privilege. — The 
case  of  Ashland  v.  Wheeler,  88  Wis.  607,  60  N.  W. 
818,  decided  in  1894,  expresses  the  principle  in  the 
following  language :     "The  franchise  is  a  special  privi- 

COLORADO.— People  ex  rel.  Johnson  v.  Earl,  42  Colo.  238,  94 
Pac.  294. 

FEDERAL.— Boise  City,  Idaho,  v.  Boise  Artesian  H.  &.  C.  Water 
Co.,  186  Fed.  705;  Capital  City  Gaslight  Co.  v.  Des  Moines,  72 
Fed.  829;  Cleveland  Gaslight  &  Coke  Co.  v.  Cleveland,  71  Fed.  610; 
Columbia  Ave.  Sav.  Fund,  &c.,  Co.  v.  Dawson,  130  Fed.  152; 
Levis  v.  Newton,  75  Fed.  884;  Morristown  v.  East  Tenn.  Tel. 
Co.,  115  Fed.  304;  Omaha  Water  Co.  v.  Omaha,  162  Fed.  225;  Southern 
Bell  Tel.  &  T.  Co.  v.  Mobile,  162  Fed.  523;  Wichita  v.  Old  Colony 
Trust  Co.,  132  Fed.  641. 

FLORIDA.— Anderson  v.  Fuller,  51  Fla.  380,  41  So.  684,  6  L.  R. 
A.  (N.  S.)  1026;  State  ex  rel.  Ellis  v.  Tampa  Waterworks  Co.,  56 
Fla.  858,  47  So.  358,  48  So.  639,  22  L.  R.  A.  (N.  S.)  680. 

ILLINOIS.— Chicago  v.  Chicago  &  O.  P.  Elevated  R.  Co.,  250 
111.  486,  95  N.  E.  456;  Chicago  Municipal  Gas  Light  &  Fuel  Co.  v. 
Lake,  130  111.  42,  22  N.  E.  616;  London  Mills  v.  White,  208  111.  289, 
70  N.  E.  313;  Madison  v.  Alton,  &c..  Traction  Co.,  235  111.  346,  85  N. 
E.  596;  People  ex  rel.  Chicago  v.  Chicago  Tel.  Co.,  220  111.  238,  77 
N.  E.  245;  People  ex  rel.  Fitzhenry  v.  Union  Gas  &  Electric  Co.,  254 
111.  395,  98  N.  E.  768;  People  ex  rel.  Jackson  v.  Suburban  R.  Co.,  178 
111.  594,  53  N.  E.  349;  People  ex  rel.  Rockwell  v.  Chicago  Tel.  Co., 
243  111.  121,  91  N.  E.  1065;  Peoria  R.  Co.  v.  Peoria  R.  Terminal  Co., 
252  111.  73,  96  N.  E.  689. 

INDIANA.— Columbus  St.  R.  &  Light  Co.  ^  <^r,i,imbus,  43  Ind. 
App.  265,  86  N.  E.  S3;  Fowler  Utilities  Co.  v.  Gray,  168  InO.  I.  7»  N. 
E.  897;  Indianapolis  v.  Consumers'  Gas  Trust  Co.,  140  Ind.  107,  S9 
N.  E.  433;  Indianapolis  v.  Indianapolis  Gas-Light  &  Coke  Co.,  66 
Ind.  396;  Indianapolis  St.  R.  Co.  v.  Citizens  St.  R.  Co.,  127  Ind. 
368,  26  N.  E.  893;  Indiana  R.  Co.  v.  Hoffman,  161  Ind.  593,  69  N. 
E.  399. 

IOWA.— Burroughs  v.  Cherokee,  134  Iowa  429,  109  N.  W.  876. 

KANSAS.— Edson  v.  Olathe,  81  Kans.  328,  105  Pac.  521,  36  L. 
R.  A.  (N.  S.)  861;  New  Hope  Tel.  Co.  v.  Concordia,  81  Kans.  514, 
106  Pac.  35. 

KENTUCKY.— Louisville  Home  Tel.  Co.  v.  Louisville,  130  Ky. 
611,  113  S.  W.  855;  Marion  Electric  Light,  &c.,  Co.  v.  Rochester,  149 
Ky.  810.  149  S.  W.  977. 

LOUISIANA.— Shreveport  Traction  Co.  v.  Shreveport,  122  La.  1, 
47  So.  40. 

MARYLAND.— Lake  Roland  El.  R.  Co.  v.  Baltimore,  77  Md. 
352,  26  Atl.  510,  20  L.  R.  A.  126,  166  U.  S.  673,  41  L.  ed.  1160. 

9— Pub.  Ut. 


§  g6  PUBLIC    UTILITIES.  I3O 

lege,  not  belonging  as  of  common  right  to  the  people 
at  large.  It  is  an  executed  contract,  the  consideration 
for  which  is  the  benefit  which  the  public  will  derive 
from  its  use  and  exercise.  The  common  council  is 
authorized  by  the  statute  to  grant  such  franchises,  and 

MASSACHUSETTS.— Amesburgy  v.  Citizens'  Electric  St.  R.  Co., 
199  Mass.  394,  85  N.  E.  419;  Murphy  v.  Worcester  Consol.  St.  R.  Co., 
199  Mass.  279,  85  N.  E.  507. 

MICHIGAN.— Detroit  v.  Detroit  United  Ry.  (Mich.)  137  N.  W. 
645;  Stevens  v.  Muskegon,  111  Mich.  72,  69  N.  W.  227,  36  L.  R.  A.  777. 

MISSISSIPPI.— Adams  v.  Samuel  R.  Bullock  &  Co.,  94  Miss. 
595,  47  So.  527;  Griffith  v.  Vicksburg  Waterworks  Co.,  88  Miss.  371, 
40  So.  1011. 

MISSOURI.— Vanderberg  v.  Kansas  City,  Mo.,  Gas  Co.,  126  Mo. 
App.  600,  105  S.  W.  17. 

NEW  YORK.— Kings  County  Elevated  R.  Co.,  In  re,  105  N.  Y. 
97,  13  N.  E.  18;  Lord  v.  Equitable  Life  Assur.  Society,  194  N.  Y. 
212,  87  N.  E.  443;  New  York  v.  Bryan,  196  N.  Y.  158,  89  N.  E.  467; 
New  York  v.  New  York  City  R.  Co.,  193  N.  Y.  543,  86  N.  E.  565; 
People  ex  rel.  Central  Park,  &c.,  R.  Co.  v.  Wilcox,  194  N.  Y.  383, 
87  N.  E.  517;  People  ex  rel.  Metropolitan  St.  R.  v.  State  Board,  174 
N.  Y.  417,  67  N.  E.  69;  People  ex  rel.  Woodhaven  Gaslight  Co.  v. 
Deehan,  153  N.  Y.  528,  47  N.  E.  787;  Phoenix  v.  Gannon,  195  N.  Y. 
471,  88  N.  E.  1066;  Skaneateles  Waterworks  Co.  v.  Skaneateles,  161 
N.  Y.  154,  55  N.  E.  562,  46  L.  R.  A.  687,  184  U.  S.  354,  46  L.  ed.  585; 
Wilcox  V.  McClellan,  185  N.  Y.  9,  77  N.  E.  986;  Wright  v.  Glen  Tel. 
Co.,  99  N.  Y.  S.  85,  112  App.  Div.  745;  New  York  Electric  Lines  Co., 
In  re,  201  N.  Y.  321,  94  N.  E.  1056;  People  ex  rel.  Third  Ave.  Ry. 
Co.  V.  Public  Service  Commission,  203  N.  Y.  299,  96  N.  E.  1011; 
People  ex  rel.  Westchester  St.  Ry.  Co.  v.  Public  Service  Commis- 
sion  (N.  Y.),  143  N.  Y.   S.   148. 

OHIO.— Gas  and  Fuel  Co.  v.  Chillicothe,  65  Ohio  St.  186;  Logan 
Natural  Gas  &  Fuel  Co.  v.  Chillicothe,  65  Ohio  St.  186,  62  N. 
E.  122;  Zanesville  v.  Zanesville  Tel.  &  T.  Co.,  64  Ohio  67,  59  N. 
E.  781. 

OKLAHOMA.— Ex  parte  Pratt    (Okla.),  134  Pac.  53. 

SOUTH  CAROLINA.— Childs  v.  Columbia,  87  S.  Car.  566,  70  S.  E. 
296,  34  L.  R.  A.  (N.  S.)  542;  Charleston  Consol.  Ry.  &c.  Co.  v. 
Charleston,  92  S.  Car.  127,  75  S.  E.  390. 

TENNESSEE.— People's  Passenger  R.  Co.  v.  Memphis  (Tenn.) 
16  S.  W.  973. 

UNITED  STATES.— Blair  v.  Chicago,  201  U.  S.  400,  50  L.  ed. 
801;  Interstate  Consol.  St.  R.  Co.  v.  Massachusetts,  207  U.  S.  79,  52 
L.  ed.  Ill;  Minneapolis  v.  Minneapolis  St.  R.  Co.,  215  U.  S.  417,  54  L. 
ed.  259;  New  Orleans  Gas  Light  Co.  v.  Louisiana  Light,  &c.,  Mfg.  Co., 
115  U.  S.  650,  29  L.  ed.  516;  People's  Gaslight  &  Coke  Co.  v.  Chicago, 
194  U.  S.  1,  48  L.  ed.  851;   St.  Tammany  Water  Works  Co.  v.  New 


j^l  THE    FRANCHISE.  §97 

they  are  as  much  the  franchises  of  the  corporation  as 
if  granted  by  an  express  statute,  for  the  common 
council  exercise  in  granting  them  a  delegated  author- 
ity, and  what  it  does  within  that  power  is  done  by 
the  legislature  through  its  agency.  The  acceptance 
of  the  conditions  of  the  grant  by  the  water  company 
beyond  doubt  constituted  a  vahd  contract  between  it 
and  the  city.  There  is  no  provision  in  the  statute 
delegating  to  the  common  council  of  the  city  the 
power  to  alter  or  repeal  a  grant  of  such  franchise, 
though,  through  the  exercise  by  the  legislature  of  the 
reserved  power  in  section  i,  article  ii,  of  the  consti- 
tution, it  might  alter  or  repeal  it  at  will.  In  the  ab- 
sence of  an  express  delegation  to  the  common  council, 
we  think  none  can  be  implied.  It  was  therefore  be- 
yond the  power  of  the  common  council  to  alter,  re- 
peal, or  impair  in  the  least  the  franchise  or  contract 
in  question,  and  the  ordinance  upon  which  this  prose- 
cution is  founded  is  therefore  clearly  void." 

§97.  Conditions  of  special  franchise  imposed  by 
municipality  binding.— The  case  of  Bluefield  Water- 
works &  I.  Co.  V.  Bluefield,  69  W.  Va.  i,  70  S.  E.  772, 
33  L.  R.  A.  (N.  S.)  759,  decided  in  191 1,  furnishes  an 
interesting  discussion  of  the  exercise  by  the  municipal- 
ity of  the  power  delegated  to  it  by  the  state  to  regu- 
late a  municipal  public  utility  by  showing  that  it  was 

Orleans  Water  Works  Co.,  120  U.  S.  64,  30  L.  ed.  563;  Grand  Trunk 
W.  R.  Co.  V.  South  Bend,  227  U.  S.  544,  57  L.  ed.  — . 

VIRGINIA.— Portsmouth,  B.  &  S.  Water  Co.  v.  Portsmouth,  112 

Va.  158,  70  S.  E.  529. 

WASHINGTON.— Dolan  v.   Puget  Sound,  &c,  Co.    (Wash.),  130 

Pac.  353. 

WEST  VIRGINIA.— Bluefield  Waterworks  &  I.  Co.  v.  Bluefield, 
69  W.  Va.  1,  70  S.  E.  772,  33  L.  R.  A.  (N.  S.)  759;  St.  Mary's  v.  Hope 
Natural  Gas  Co.  (W.  Va.),  76  S.  E.  841. 

WISCONSIN.— Ashland  v.  WTieeler,  88  Wis.  607,  60  N.  W.  818; 
Superior  v.  Douglas  County  Tel.  Co.,  141  Wis.  363.  122  N.  W.  1023, 
Milwaukee  Electric  Ry.  &  L.  Co.  v.  Railroad  Commission  (Wis.). 
142  N.  W.  491. 


§  97  PUBLIC    UTILITIES.  I32 

essential  to  obtain  such  municipal  consent  subject  to 
the  terms  and  conditions  imposed  as  the  condition  of 
granting  it,  but  that  when  the  consent  thus  obtained 
was  accepted  by  the  company  the  contract  was  formed 
and  the  rights  of  the  parties  became  vested,  including 
those  of  the  inhabitants  of  the  city  for  whose  benefit 
the  contract  was  made.  The  court  said:  "This  cor- 
poration, chartered  by  the  state,  could  not  obtain  the 
right  to  occupy  the  streets  of  the  city  or  do  business 
therein  under  its  state  franchise,  without  the  consent 
of  the  city.  In  order  to  obtain  that  consent,  it  was 
bound  to  submit  itself  to  such  regulatory  conditions 
as  the  city  saw  fit  to  impose.  When  these  conditions 
were  imposed  and  accepted  by  the  company,  the  pre- 
scription and  acceptance  thereof  formed  a  contract 
between  the  city  and  the  company.  Railroad  Co.  v. 
Triadelphia,  58  W.  Va.  487,  52  S.  E.  499;  Clarksburg 
E.  L.  Co.  V.  Clarksburg,  47  W.  Va.  739,  50  L.  R.  A. 
142.  The  power  thus  conferred  upon  the  company  to 
occupy  the  streets  and  do  business  is  not  revocable, 
except  for  breach  of  the  contract  in  some  form  by  the 
company.  It  is  a  contract  fully  protected  by  the  con- 
stitutional guaranties,  and  immune  from  destruction 
or  impairment  by  the  city.  The  contractual  relation 
extends  not  only  to  the  immediate  parties,  the  city 
and  the  company,  but  also  to  the  inhabitants  of  the 
city.  It  confers  upon  them  rights  which  the  company 
can  not  withhold  nor  deny,  and  also  upon  the  com- 
pany rights  which  the  city  can  not  destroy.  The  rates 
prescribed  by  the  contract,  if  any,  and  the  remedies 
for  the  enforcement  thereof,  left  in  the  hands  of  the 
company,  such  as  rules  and  regulations,  form  parts  of 
the  contract.  Detroit  v.  Railway  Co.,  184  U.  S.  368, 
22  Sup.  Ct.  410,  46  L.  Ed.  592;  Water  Co.  v.  Knox- 
ville,  189  U.  S.  434,  23  Sup.  Ct.,531,  47  L.  Ed.  887; 
Cleveland  v.  Railway  Co.,  201  U.  S.  529,  26  Sup.  Ct. 


133  "^^^   FRANCHISE.  §98 

513,  50  L.  Ed.  854.  Of  course,  the  rates  and  method 
of  doing  business  are  subject  to  regulation  to  some 
extent  by  the  state,  under  its  general  police  power, 
but  not  by  the  city;  the  state  not  having  delegated  to 
it  power  to  make  such  regulations.  In  its  use  of  the 
streets  and  its  general  conduct  it  is  subject  to  such 
regulations  as  the  city  may  make  under  the  police 
powers  delegated  to  it;  but  these  do  not  extend  to 
rates  and  terms  of  contract.  The  function  performed 
by  a  municipal  corporation  in  securing  rates  and  guar- 
anties of  modes  of  transacting  business  between  itself 
and  public  utility  corporations  seems  to  rest  upon  its 
contractual,   not   its   legislative,   capacity." 

§  98.  Inhabitants  may  enforce  franchise  provisions. 
— The  case  of  Portsmouth,  B.  &  S.  Water  Co.  v. 
Portsmouth,  112  Va.  158,  70  S.  E.  529,  decided  in 
191 1,  indicates  that  the  obligations  of  the  contract  are 
imperative  and  that  its  privileges  are  available  to  the 
inhabitants  and  their  performance  will  be  enforced 
by  the  courts  upon  proper  application.  The  court  in 
the  course  of  its  decision  spoke  as  follows:  "By  the 
terms  of  its  contract  with  the  city,  it  had  the  exclusive 
privilege  of  using  the  streets  of  the  city  for  the  pur- 
pose of  furnishing  water  to  it  and  its  inhabitants.  The 
duty  of  furnishing  water  for  sewerage  purposes  for  the 
fifth  ward  of  the  city  was  one  which  it  owed  in  effect 
to  the  city,  and  a  refusal  to  make  the  tappings  and 
connections  in  question  was  a  refusal  to  furnish  water 
for  sewerage  purposes  in  that  part  of  the  city.  If 
this  duty  had  been  imposed  by  the  provisions  of  the 
charter  of  the  water  company  or  by  an  ordinance  of 
the  city,  under  our  decisions  there  could  be  no  ques- 
tion that  it  was  a  public  duty,  and  its  performance,  in 
a  proper  case,  could  be  enforced  by  mandamus.  Rich- 
mond, etc.,  Ry.  Co.  v.  Brown,  97  Va.  26,  32  S.  E.  775 ; 


§  99  PUBLIC    UTILITIES.  1 34 

Vinton-Roanoke  Water  Co.   v.   City  of  Roanoke,    no 
Va.  66i,  66  S.  E.  835,  and  authorities  cited. 

The  ordinance  of  a  city  prescribing  the  terms  and 
conditions  upon  which  a  water  company  may  lay  its 
mains  and  pipes  in  the  streets  of  the  city  and  furnish 
water  to  it  and  its  inhabitants,  when  accepted  by  the 
water  company,  constitutes  the  contract  between  the 
city  and  the  water  company.  Where  the  obhgation 
on  the  water  company  is  the  same,  it  would  seem  to  be 
of  little  consequence  whether  the  contract  between 
the  city  and  the  water  company  be  in  one  form  or  in 
the  other,  as  to  the  right  to  compel  the  performance 
of  the  duty  by  mandamus." 

§  99.  Special  franchise  necessary  to  use  of  general 
franchise. — The  rule  that  when  it  is  necessary  to  se- 
cure the  consent  of  the  municipality,  such  consent  is 
a  condition  precedent  to  the  practical  enjoyment  of 
the  right  to  be  a  corporation,  which  is  of  no  value 
without  the  right  to  install  and  maintain  its  plant,  is 
well  expressed  by  the  decision  of  People's  Passenger 
R.  Co.  V.  Memphis  (Tenn.),  16  S.  W.  973,  de- 
cided in  1875,  i"  the  following  language:  "By  the 
fourth  section  of  the  act  incorporating  the  'People's 
Passenger  Railroad  Co.  of  Memphis'  it  had  authority 
to  operate  street  railways  by  animal  power  on  all  the 
streets  of  Memphis,  'with  the  consent  of  the  said  city.* 
It  was  conclusively  settled  by  the  Supreme  Court  of 
this  state  and  of  the  United  States  in  the  cases  of 
Memphis  City  R.  Co.  v.  Mayor,  etc.,  4  Cold.  406,  413, 
416,  and  People's  Passenger  R.  Co.  v.  Memphis  City 
R.  Co.,  10  Wall.  38-55,  that  the  said  corporation,  the 
'People's  Passenger  Railroad  Co,  of  Memphis,'  never 
procured  or  obtained  the  city's  consent  to  its  use  of 
any  of  the  streets  for  the  purpose  of  operating  street 
railways  thereon,  as  provided  by  the  fourth  section  of 


135  "^^^   FRANCHISE.  §  lOO 

the  act  of  incorporation,  and  by  the  resolution  of  the 
board  or  mayor  and  aldermen,  when  permission  was 
given  for  Small  and  his  associates  to  procure  said 
act.  .  .  .  The  legal  effect  of  the  city's  withholding 
or  refusing  its  assent  to  said  corporation's  use  and 
occupation  of  the  streets  was  to  render  the  grant  con- 
ferred by  the  act  of  incorporation  inoperative  and 
useless  to  the  individual  promoters." 

§  100.  Franchise  rights  of  inhabitant  and  non- 
resident distinguished. — But  while  the  right  to  enjoy 
the  conveniences  of  municipal  public  utilities  provided 
for  by  the  municipality  in  its  franchise  is  generally 
held  to  be  available  to  the  inhabitants  of  the  municipal- 
ity, these  privileges  are  not  available  to  nonresidents; 
as  is  stated  in  the  case  of  Childs  v.  Columbia,  87  S. 
Car.  566,  70  S.  E.  296,  34  L.  R.  A.  (N.  S.)  542,  de- 
cided in  191 1,  where  the  court  speaks  as  follows: 
"This  action  was  brought  by  W.  G.  Childs  to  enjoin 
the  city  of  Columbia  from  cutting  off  his  water  sup- 
ply or  charging  him  a  water  rate  alleged  to  be  exor- 
bitant, discriminatory,  and  unreasonable.  .  .  .  The 
plaintiff  lives  outside  of  the  city,  but  the  city  agreed 
about  ten  years  ago  to  furnish  water  for  his  residence 
and  other  houses  occupied  by  others  as  residences,  but 
belonging  to  plaintiff,  also  beyond  the  corporate  limits, 
'at  the  customary  and  usual  price.'     .     .     . 

"Assuming  the  correctness  of  this  position,  it  does 
not  by  any  means  follow  that  the  city  occupied  towards 
the  plaintiff,  a  nonresident,  the  relation  of  a  public- 
service  corporation,  under  obligation  to  contract  with 
him  for  his  water  supply  at  a  reasonable  rate,  without 
discrimination.  All  powers  and  privileges  conferred 
by  the  Constitution  and  statutes  on  municipal  corpora- 
tions must  be  held  to  be  limited  in  their  exercise  to 
the    territory   embraced    in    the    municipal    boundaries, 


§  lOI  PUBLIC    UTILITIES-  1 36 

and  for  the  benefit  of  the  inhabitants  of  the  munici- 
pality.    .     .     . 

"Assuming  that  the  city  authorities  had  the  power 
to  contract  with  the  plaintiff  to  furnish  water  for  his 
residence  and  other  houses,  and  that  the  duty  de- 
volves on  them  of  contracting  for  the  sale  of  any  ex- 
cess of  the  city's  water  supply  beyond  the  municipal 
needs  and  the  needs  of  its  inhabitants,  it  is,  neverthe- 
less, perfectly  obvious  that  the  duty  to  sell  the  excess 
of  its  water  supply  did  not  import  an  obligation  to 
make  a  contract  with  any  particular  person  at  a  rea- 
sonable price;  but,  on  the  contrary,  did  import  an 
obligation  to  sell  its  surplus  water  for  the  sole  benefit 
of  the  city,  at  the  highest  price  obtainable.  ...  It 
follows  that  the  plaintiff,  as  a  mere  nonresident,  had 
no  rights  whatever  against  the  city,  except  such  as  he 
may  have  acquired  by  contract." 

§  10 1.     State  control  of  municipal  franchise  grants. 

— As  the  power  to  grant  the  necessary  franchise  rights 
to  be  a  body  corporate  as  well  as  to  use  and  enjoy  the 
rights  thereby  conferred  by  operating  a  public  utility 
plant  resides  in  the  state,  the  legislature  acting  for  the 
state  may  delegate  the  power  to  the  municipality  to 
impose  certain  conditions  in  connection  with  the  ex- 
ercise of  such  rights  and  provide  that  in  the  event  the 
municipality  and  the  corporation  are  unable  to  agree, 
the  matters  in  dispute  may  be  decided  by  such  court 
as  may  be  designated.  This  application  of  the  general 
principle  is  well  illustrated  in  the  case  of  Zanesville  v. 
Zanesville  Tel.  &  T.  Co.,  64  Ohio  67,  59  N.  E.  781, 
decided  in  1901,  to  the  following  effect:  "It  is 
competent  for  the  state,  through  its  legislative  depart- 
ment, to  grant  to  telephone  and  telegraph  companies 
organized  under  its  authority  the  right  to  construct 
their  lines  in  the  streets  of  municipalities,  and  in  the 


137  "^^^   FRANCHISE.  §  102 

present  instance  the  grant  was  so  made.  The  inability 
or  failure  of  the  council  to  come  to  an  agreement  with 
the  company  in  regard  to  the  mode  of  using  the 
streets  for  that  purpose  practically  amounts  to  a  denial 
of  the  company's  right,  the  remedy  for  the  enforce- 
ment of  which  is  that  provided  by  section  3461  of  the 
Revised  Statutes.     .     .     . 

"The  necessity  for  the  existence  of  some  tribunal 
authorized  to  hear  and  determine  disagreements  be- 
tween municipalities  and  telephone  companies  witu 
respect  to  the  mode  of  construction  of  the  companies* 
lines  in  the  public  streets  is  apparent,  not  only  for  the 
protection  of  the  rights  of  the  respective  corporations, 
but  also  in  the  public  interest,  as  conservative  of  peace 
and  good  order,  and  in  securing  to  the  public  the  full 
benefit  of  the  service  such  companies  are  designed  to 
afford,  at  those  reasonable  rates  which  always  attend 
fair  competition,  and  the  best  consideration  we  have 
been  able  to  give  this  case  has  failed  to  satisfy  us  that 
the  power  conferred  on  the  probate  court  by  the  stat- 
utory provision  in  question  has  been  inappropriately 
bestowed." 

§  102.  Power  of  municipality  to  regulate. — The 
case  of  Wright  v.  Glen  Tel.  Co.,  99  N.  Y.  S.  85,  112 
App.  Div.  (N.  Y.)  745,  decided  in  1906,  indicates  that 
while  the  power  delegated  to  the  municipality  is  gen- 
erally liberally  construed  in  favor  of  the  municipality, 
where  such  statutory  power  consists  simply  in  defin- 
ing the  police  power  in  connection  with  regulating  the 
installing  of  the  plant,  the  city  can  not  regulate  the 
service  to  the  extent  of  absolutely  fixing  the  rates 
therefor.  In  so  deciding  the  court  says:  "Plaintiff's 
contention,  that  he  is  entitled  to  service  upon  the 
terms  stated  in  the  so-called  franchise  given  to  the 
defendant  from  the  city  of  Gloversville,  is,  we  think. 


§  I02  PUBLIC    UTILITIES.  1 38 

not  sound.  The  right  to  construct  its  line  along  and 
upon  the  highways  is  given  by  the  statute.  By  section 
41,  c.  275,  p.  533,  of  the  Laws  of  1899,  the  municipal 
authorities  of  the  city  of  Gloversville  are  only  given 
the  right  'to  regulate  the  setting  and  stringing  of  tele- 
graph, telephone,  electric  light  and  power,  and  other 
poles  and  wires  in  said  city.'  The  power  of  the  mu- 
nicipality is  simply  a  police  power,  to  be  exercised  for 
the  protection  of  the  citizens.  It  can  not  use  that 
power  for  the  purpose  of  forcing  a  contract  with  a 
telephone  company  for  benefits  to  itself  or  to  the  citi- 
zens. ...  In  fact,  it  can  make  no  contract  with 
the  company  which  could  not  be  altered  by  a  subse- 
quent municipal  council  if  necessary  for  the  protec- 
tion of  the  citizens.  If  this  be  sound  law,  the  fran- 
chise can  in  no  way  be  a  contract  binding  upon  the 
defendant  as  to  compensation  for  service  for  lack  of 
consideration." 

That  the  power  which  the  state  delegates  to 
the  municipality  is  subject  at  all  times  to  the  con- 
trol of  the  state  and  that  the  municipality  can  not  ex- 
ercise any  power  inconsistent  with  that  delegated  to 
it  nor  in  any  way  interfere  with  the  power  reserved 
to  the  state  is  well  illustrated  by  the  case  of  In  re 
Kings  County  Elevated  R.  Co.,  105  N.  Y.  97,  13  N. 
E.  18,  decided  in  1887,  where  the  court  makes  the 
following  statement  of  this  principle :  "The  statute 
determines  how  the  damages  of  the  landowner  shall 
be  ascertained,  and  confers  upon  the  commissioners 
sole  power  and  jurisdiction  to  determine  when  the 
various  portions  of  the  road  shall  be  completed.  Their 
action  is  as  the  action  of  the  legislature,  and  can 
neither  be  superseded  nor  in  any  way  afifected  by  that 
of  any  other  body.  But  here  the  resolution  of  the 
common  council  is  wholly  repugnant  to  the  statute  in 


139  THE   FRANCHISE.  §  IO3 

one  case,  and  to  the  condition  imposed  by  the  com- 
missioners in  the  other.  The  statute  requires  the  ap- 
pointment by  the  Supreme  Court  of  commissioners  of 
appraisal,  defines  the  mode  of  procedure,  and  gives 
effect  to  their  decision,  both  as  respects  the  company 
and  the  landowner.  The  common  council  requires  the 
company  to  consent,  at  the  option  of  the  landowner, 
to  have  his  damages  ascertained  by  the  assessors  for 
the  city,  and  to  abide  by  their  decision  as  to  damage 
or  injury,  including  depreciation  in  value  to  any  prop- 
erty abutting  upon  and  along  the  line  of  the  road. 
These  two  schemes  are  inconsistent  and  can  not 
stand  together.  .  .  .  The  power  to  recall  a  consent 
is  not  given  by  the  act  of  1875,  neither  can  it  by  the 
operation  of  any  cause  set  on  foot  by  the  local  author- 
ities, when  once  given,  be  annulled." 

§  103.  Franchise  rights  follow  growth  of  mu- 
nicipality.— The  case  of  People  ex  rel.  Woodhaven 
Gaslight  Co.  V.  Deehan,  153  N.  Y.  528,  47  N.  E.  787, 
indicates  that  the  contract  right  to  own  and  operate 
a  municipal  public  utility,  which  becomes  vested  on 
the  acceptance  of  the  franchise,  is  coextensive,  not 
only  with  the  limits  of  the  city  as  defined  at  the  time 
of  the  grant,  but  that  the  future  growth  and  later  ad- 
ditions to  the  city  are  covered  by  the  franchise,  for 
as  the  court  said:  "When  the  right  to  use  the  streets 
has  been  once  granted  in  general  terms  to  a  corpora- 
tion engaged  in  supplying  gas  for  public  and  private 
use,  such  grant  necessarily  contemplates  that  new 
streets  are  to  be  opened  and  old  ones  extended  from 
time  to  time,  and  so  the  privilege  may  be  exercised 
in  the  new  streets  as  well  as  in  the  old.  Such  a  grant 
is  generally  in  perpetuity  or  during  the  existence  of 
the  corporation,  or  at  least  for  a  long  period  of  time, 
and    should    be    given    effect    according    to    its    nature, 


§  I03  PUBLIC    UTILITIES.  I4O 

purpose,  and  duration.  There  is  no  good  reason  for 
restricting  its  operation  to  existing  highways,  unless 
that  purpose  appears  from  the  language  employed." 
The  effect  of  this  principle  is  brought  out  in  even 
a  more  striking  manner  in  the  case  of  People  ex  rel. 
Chicago  V.  Chicago  Tel.  Co.,  220  111.  238,  jj  N.  E.  245, 
where  the  court  held  that  on  the  annexation  of  one 
independent  municipality  to  the  other,  the  existence 
of  the  former  was  terminated  together  with  the  priv- 
ileges granted  by  it  which  are  supplanted  by  the  or- 
dinances and  franchises  granted  thereunder  of  the  mu- 
nicipality which  annexes  the  other.  This  principle  se- 
cures uniformity  in  the  service  and  encourages  the 
extension  of  municipal  public  utilities  on  a  uniform 
basis  with  the  additions  to  the  city  by  virtue  of  an- 
nexation; nor  can  the  objection  be  raised  that  the 
franchise  rights  granted  by  the  territory  annexed  are 
unjustly  terminated,  their  duration  not  being  fixed  by 
the  grant,  on  its  becoming  a  part  of  the  annexing  mu- 
nicipality, because  privileges  granted  are  limited  to 
the  life  of  the  municipality  granting  them.  The  deci- 
sion of  this  point  in  the  case  just  referred  to  is  in  part 
as  follows :  "The  limitation  that  the  defendant  should 
not  increase  to  its  present  or  future  subscribers  within 
the  city  of  Chicago  the  rates  for  telephone  service 
then  established  had  no  provision  restricting  it  to  the 
existing  limits  of  the  city.  The  words  of  the  ordi- 
nance are  clear  and  not  ambiguous,  and  apply  to  all 
the  territory  within  the  city  of  Chicago  during  the 
period  of  the  grant.  The  ordinance  having  been  ac- 
cepted by  the  defendant  became  a  contract  by  which 
both  parties  were  bound,  and  the  territory  which  has 
since  been  annexed  to  the  city  is  within  the  city  of 
Chicago.  .  .  .  The  ground  of  defendant's  claim  that 
the  ordinance  does  not  limit  its  charges  in  the  annexed 
territory  is  that  before  the  annexation  the  minor  mu- 


141  THE   FRANCHISE.  §  IO3 

nicipalities  had  granted  to  it  the  right  to  occupy  the 
streets  therein  for  its  business  without  any  limit  as  to 
time.  If  the  grants  had  been  for  terms  of  years  under 
legislative  authority  authorizing  them,  and  the  terms 
had  extended  beyond  the  existence  of  the  corporations 
granting  the  privileges,  there  might  be  ground  for 
saying  that  the  grants  were  binding  upon  the  city 
because  they  had  become  binding  contracts  under 
which  the  defendant  had  vested  contract  rights  for 
such  terms.  But  they  were  not  for  definite  periods, 
and  the  grants  were  in  consideration  of  furnishing 
something  to  the  town  or  village,  such  as  telephone 
service  to  the  town  or  village  hall  or  the  village  au- 
thorities free  or  for  some  reduced  rate.  Such  grants 
can  not  be  construed  to  be  perpetual,  and  at  most 
can  not  extend  beyond  the  lives  of  the  corporations 
granting  them.  Upon  annexation,  there  ceased  to  be 
any  town  or  village  authorities  entitled  to  the  benefits 
of  the  contract  or  authorized  to  demand  or  receive 
them,  and  it  could  not  have  been  understood  that  the 
grant  should  continue  discharged  of  the  obligation 
annexed  to  it.  .  .  .  The  ordinances  of  the  city  ex- 
tended over  the  annexed  territory  immediately  upon 
annexation  (Illinois  Central  Railroad  Co.  v.  City  of 
Chicago,  176  U.  S.  646),  and  the  Hmitations  of  the 
ordinance  applied  to  the  annexed  territory.  ...  To 
construe  the  ordinance  otherwise  would  be  to  say  that 
whenever  any  improvement  is  made  in  the  service,  the 
defendant  may  rid  itself  of  all  its  obligations  with  re- 
spect to  rates  and  still  enjoy  the  grant — may  retain 
the  benefits  and  escape  the  burdens  of  the  contract. 
.  .  .  Under  the  ordinance,  the  defendant  can  not 
be  required  to  adopt  improvements  in  the  service  or 
equipment  or  to  keep  up  with  the  general  progress  in 
the  business,  but  if  it  sees  fit  to  adopt  improvements 
and  furnish  a  better  grade  of  telephone  service,  it  can 


§  I04  PUBLIC    UTILITIES.  I42 

only  have  the  benefit  of  the  ordinance  granting  it  the 
right  to  use  the  pubHc  streets  by  complying  with  the 
terms  of  the  ordinance  and  not  increasing  the  rates." 

§  104.  Rights  not  expressly  granted  are  reserved 
to  municipality. — An  excellent  statement  of  the  prin- 
ciple in  question  supplemented  by  the  other  which  is 
equally  well  established  that  all  rights  that  are  not 
expressly  granted  are  reserved  and  that  the  policy  of 
strict  construction  against  the  grantee  is  adopted  by 
our  courts  is  furnished  by  the  case  of  Skaneateles 
Waterworks  Co.  v.  Skaneateles,  i6i  N.  Y.  154,  55  N. 
E.  562,  46  L.  R.  A.  687,  184  U.  S.  354,  46  L.  ed.  585, 
decided  in  1899,  where  the  court  held:  "All  franchises 
come  from  the  state,  although  the  legislature  may,  and 
often  does,  delegate  to  municipal  authorities  the  right 
to  take  final  action  in  the  procedure  resulting  in  the 
creation  of  a  franchise.  Ghee  v.  Gas  Co.,  158  N.  Y. 
510,  513,  53  N.  E.  692.  The  effect  of  such  action,  if 
within  the  legislative  permission,  is  to  allow  the  gran- 
tee to  carry  on  the  business  authorized  by  the  fran- 
chise. All  rights  not  expressly  granted  by  it  are,  as 
we  have  seen,  reserved.  The  rights  thus  reserved  in- 
clude in  part  the  granting  of  a  franchise  to  another 
corporation  to  carry  on  the  same  business  in  the  same 
territory.  The  power  to  grant  the  additional  fran- 
chise, as  well  as  the  first  one,  the  municipality  acquires 
from  the  legislature,  which  has  the  power  to  deter- 
mine whether  the  rights  reserved  upon  the  grant  of 
the  first  franchise  shall  be  exercised  by  a  private  cor- 
poration or  by  the  municipal  corporation.  It  may  well 
be  that  competition  by  the  municipality  more  seriously 
affects  the  earning  capacity  of  the  private  corporation 
than  would  the  competition  of  another  private  cor- 
poration; but  the  test  of  legislative  power  in  such  case 
is  not  whether  the  agency   selected  to   construct   and 


143  "^HE   FRANCHISE.  §  105 

operate  competing  water-works  is  effective  or  other- 
wise, but  whether  the  statute  providing  for  the  agency 
also  contains  provisions  assisting  it  to  impair  or  de- 
stroy the  property  of  the  private  corporation  by  other 
means  than  competition." 

§  105.  Duty  of  municipality  in  granting  fran- 
chises.— The  case  of  Phoenix  v.  Gannon,  195  N.  Y, 
471,  88  N.  E.  1066,  decided  in  1909,  in  sustaining  this 
principle  very  wisely  observes  that  the  proper  time  to 
impose  conditions  and  to  provide  for  the  proper  reg- 
ulation of  corporations  providing  public  utilities  is  in 
connection  with  the  granting  of  the  franchise.  The 
court  said:  "The  question  whether  a  municipality  can 
grant  to  an  individual  a  franchise  for  the  construction 
and  operation  of  a  street  surface  railroad  is  not  free 
from  doubt;  but  we  are  inclined  to  the  view  that  the 
question  must  be  answered  in  the  affirmative.  Pri- 
marily the  power  to  grant  franchises  in  the  public 
streets  resides  in  the  state.  Municipalities  have  only 
such  power  in  this  regard  as  has  been  delegated  to 
them  by  the  legislature.  Beekman  v.  Third  Ave.  R. 
R.  Co.,  153  N.  Y.  144,  152,  47  N.  E.  277;  Fanning  v. 
Osborne,  102  N.  Y.  441,  7  N.  E.  307.  That  this  sov- 
ereign power  has  been  thus  delegated  is  not  questioned. 
.  .  .  If  municipalities  in  granting  such  consents 
will  hedge  them  about  with  proper  conditions,  indi- 
viduals will  not  rashly  or  carelessly  ask  for  franchises 
which  they  can  not  hope  to  use.  In  cities  of  the  sec- 
ond class  these  franchises  are  now  required  to  be  sold 
to  the  highest  bidder,  and,  if  the  element  of  competi- 
tion in  such  municipalities  is  to  be  eliminated  or  lim- 
ited by  prohibiting  individuals  from  bidding,  that 
should  be  done  by  legislative  enactment  and  not  by 
judicial  construction." 


§  I06  PUBLIC    UTILITIES.  I44 

§  106.  General  and  special  franchise  defined. — The 
case  of  New  York  v.  Bryan,  196  N.  Y.  158,  89  N.  E. 
467,  decided  in  1909,  furnishes  an  interesting  illustra- 
tion by  analogy  of  the  relative  power  of  the  state  and 
the  municipality  in  the  matter  of  granting  franchises 
to  municipal  public  utilities  by  the  following  language: 
"But  the  consent  of  the  municipal  authorities  was  not 
the  grant  of  an  independent  franchise,  like  the  deed 
from  the  owner  where  the  railroad  runs  through  pri- 
vate property.  Not  only  the  franchise  to  be  a  corpo- 
ration, but  the  franchise  granted  to  a  corporation 
when  formed,  spring  from  the  state.  It  is  the  ele- 
mentary definition  of  a  franchise  that  it  is  a  grant 
from  the  sovereign  power.  .  .  .  The  case  is  most 
analogous  to  that  of  a  trustee  who  is  authorized  to 
convey  the  corpus  of  the  trust  only  with  the  consent 
of  the  beneficiary.  The  consent  of  the  beneficiary  is 
necessary;  nevertheless  the  title  acquired  by  the  gran- 
tee is  that  of  the  trustee,  and  not  that  of  the  bene- 
ficiary. Therefore  the  consent  of  the  city  was  but  a 
step  in  the  grant  of  a  single,  indivisible  franchise  to 
construct  and  operate  a  street  railroad." 

§  107.  Franchise  rights  protected  by  court  of 
equity. — The  equity  of  this  principle  in  protecting  the 
property  interests  necessarily  invested  in  the  con- 
struction and  operation  of  a  municipal  pubhc  utility 
plant  under  the  special  franchise  privileges  granted 
for  the  purpose  is  indicated  in  the  case  of  Stevens  v. 
Muskegon,  iii  Mich.  72,  69  N.  W.  227,  36  L.  R.  A. 
yjj,  decided  in  1896,  where  the  city  was  denied  the 
right  to  revoke  the  special  privilege  granted  by  it  to 
a  party  for  the  purpose  of  constructing  a  system  of 
sewerage,  the  court  saying:  "It  was  known  to  the 
parties  that  plaintiff  must  incur  great  expenses,  and 
it  would  be  absurd  to  hold  that  he  and  the  city  en- 


145  THE   FRANCHISE.  §  Io8 

tered  into  this  arrangement  for  their  mutual  benefit 
with  the  understanding  that  the  city  might  at  any- 
time revoke  it,  and  impose  the  entire  loss  upon  the 
plaintiff.     .     .     . 

"The  passage  of  the  ordinance  and  its  enforcement 
did  not,  therefore,  give  the  plaintiff  a  remedy  by  an 
action  at  law  to  recover  damages.  Culver  v.  City  of 
Streator  (111.  App.),  22  N.  E.  810;  Trammell  v.  Town 
of  Russellville,  34  Ark.  105.  We  think  the  only  ap- 
propriate remedy  is  by  some  proceeding  to  restrain 
the  action  of  the  council-  from  interfering  with  the 
plaintiff's  legal  rights." 

§  108.  All  franchise  rights  subject  to  exercise  of 
police  power. — That  the  contract  right  and  property 
interests  are  subject  at  all  times  to  the  regulation  of 
the  police  power  and  that  the  special  franchise  privi- 
lege may  be  revoked  or  materially  modified  before  the 
expenditure  necessary  to  install  and  operate  the  pub- 
lic utility  plant  or  a  part  of  it  has  been  incurred  is 
the  effect  of  the  decision  in  the  case  of  Lake  Roland 
EI.  R.  Co.  V.  Baltimore,  yy  Md.  352,  26  Atl.  510,  20 
L.  R.  A.  126,  decided  in  1893.  In  this  case,  however, 
the  city  had  the  right  to  repeal  the  ordinance  and  to 
modify  its  consent  to  the  laying  of  a  double  track  in 
a  certain  street  as  a  part  of  the  street  railway  system. 
By  limiting  that  right  to  a  single  track  in  the  interest 
of  the  public  safety  and  after  due  notice  given  to  the 
corporation  that  it  would  so  modify  its  consent,  the 
court  held  that  the  municipality  was  not  liable  for 
expenses  incurred  in  building  the  double  track  after 
the  giving  of  such  notice,  for  the  reason  that  the  or- 
dinance giving  such  consent  did  not  vest  in  the  com- 
pany an  irrevocable  right  in  the  streets.  In  the  course 
of  its  opinion  the  court  said:  "Although  the  city  had 
a  right  to  repeal  this  ordinance,   it  would  have  been 

10— Pub.  ut. 


§  I09  PUBLIC    UTILITIES.  I46 

obliged  to  make  compensation  to  the  railroad  com- 
pany if  the  expense  of  laying  the  tracks  on  Lexington 
street  had  been  reasonably  incurred  in  reliance  on  Or- 
dinance No.  23.  The  cases  which  we  have  already 
cited  show  the  opinion  of  this  court  on  this  subject. 
But  the  tracks  were  laid  on  Lexington  street  after  the 
mayor's  objection  to  a  double  track  was  made  known 
to  the  president  of  the  railroad  company.  .  .  .  On 
the  7th  of  November  the  mayor  and  city  solicitor  each 
wrote  a  letter  to  the  president,  informing  him  that  at 
the  first  meeting  of  the  city  council  an  ordinance 
would  be  submitted  to  prohibit  the  laying  of  the  dou- 
ble track.  After  the  receipt  of  these  letters  by  the 
president  the  work  of  laying  the  double  track  was 
continued  night  and  day,  without  intermission,  until 
it  was  completed.  .  .  .  We  do  not  see  how,  in  any 
way,  the  city  can  be  held  responsible  for  the  expense 
incurred  under  these  circumstances  by  the  construc- 
tion of  these  Lexington  street  tracks.  To  say  the 
least,  the  expense  was  unnecessarily  incurred,  after 
full  knowledge  of  the  purpose  on  the  part  of  the 
mayor  to  recommend  the  passage  of  the  repealing  or- 
dinance so  soon  as  it  could  be  effected.  The  ordi- 
nance was  promptly  passed  as  soon  as  the  city  coun- 
cil met."  This  case  was  affirmed  in  Baltimore  v.  Bal- 
timore Trust  Co.,  166  U.  S.,  673,  41  L.  ed.,   1160. 

§  109.  Franchise  grants  for  benefit  of  inhabitants 
primarily. — That  the  interest  of  the  city  in  granting 
such  special  privileges  is  for  the  general  welfare  and 
the  common  good  of  its  citizens  and  not  for  the  private 
advantage  of  the  city  as  distinguished  from  its  inhab- 
itants and  that  the  action  in  granting  the  consent  of 
the  city  is  a  public  governmental  one  and  does  not 
involve  the  private  proprietary  interests  of  the  city 
itself  is  well  indicated  by  the  case  of  Louisville  Home 


147  "THE    FRANCHISE.  §  I  lO 

Tel.  Co.  V.  Louisville,  130  Ky.  611,  113  S.  W.  855, 
decided  in  1908,  where  the  court  speaks  as  follows: 
"A  municipality  has  the  power  and  right  to  erect, 
maintain,  and  operate  plants,  and  use  the  public  streets 
for  furnishing  such  utilities  for  the  municipality  itself 
and  to  its  inhabitants.  Such  power  or  duty  it  may 
discharge  by  having  others  perform  them  for  it  upon 
such  terms  as  may  be  agreed  upon  in  the  form  and 
manner  prescribed  by  law.  What,  therefore,  is  com- 
monly termed  the  'granting'  of  a  franchise  by  a  city 
for  one  of  these  public  utilities  is  in  the  nature  of  a 
contract  by  the  city  with  the  grantee  for  the  per- 
formance of  a  public  service.  .  .  .  From  this  view 
of  the  subject  it  will  readily  be  seen  that  the  primary 
object  a  city  would  have,  in  contracting  for  or  pro- 
curing the  service  of  such  utilities,  is  not  the  revenue 
to  be  obtained  for  the  city,  but  the  securing  of  good 
and  efficient  service,  and  upon  such  terms  as  will,  in 
the  judgment  of  the  city's  governing  body,  promote 
the  greatest  good,  not  alone  to  those  who  use  the 
utility,  the  telephone  for  instance,  but  to  the  entire 
community,   including  city  government." 

§110.  Granting  franchise  is  public  and  govern- 
mental.— As  the  city  is  acting  in  its  governmental  ca- 
pacity and  not  for  the  benefit  of  its  private  business 
interests,  there  is  no  liability  in  damages  on  the  part 
of  the  city  where  its  officers  attempt  to  revoke  the 
franchise  privileges  by  passing  a  repealing  ordinance. 
Although  the  officials  in  passing  such  an  ordinance 
attempted  to  revoke  the  special  privilege  in  the  exer- 
cise of  its  police  power,  if  they  did  not  have  the  neces- 
sary power  to  do  so,  the  repealing  ordinance  would  be 
ineffective  and  its  passage  might  be  enjoined,  but  the 
municipality  could  not  be  subjected  to  a  liability  in 
damages  for  such  action,  because  as  the  court  in  the 


§111  PUBLIC    UTILITIES.  I48 

case  of  Edson  v.  Olathe,  8i  Kans.  328,  105  Pac.  521, 
36  L.  R.  A.  (N.  S.)  861,  decided  in  1909,  says: 
"Therefore  the  city  is  under  no  more  liability  for  the 
conduct  of  its  officers  in  publishing  an  ordinance, 
whereby  it  acquires  the  quality  of  law,  than  it  is  for 
the  conduct  of  the  same  officers  in  considering  the 
ordinance  section  by  section,  or  in  voting  upon  it. 

"In  granting  the  franchise  the  city  acted  in  a 
purely  governmental  capacity.  It  sought  to  promote 
the  general  welfare,  and  nothing  else.  It  had  no  pri- 
vate, proprietary  end  in  view,  obtained  no  advantages 
of  that  character,  and  assumed  no  obligations  of  that 
kind.  The  repealing  ordinance  dealt  with  the  same 
subject,  the  general  welfare,  and  nothing  else.  .  .  . 
What  the  city  officials  did  was  to  prevent  the  streets 
from  being  invaded  and  permanently  occupied  by  the 
plaintiff  with  its  ties  and  rails  and  wires  and  poles 
and  moving  cars,  to  the  detriment  of  the  traveling 
public.  It  may  be  that  the  repealing  ordinance  was 
void. 

"If  the  city  officials  acted  in  bad  faith,  the  city 
might  be  enjoined  (Paola  v.  Wentz,  79  Kans.  148, 
131  Am.  St.  Rep.  290,  98  Pac.  775),  but  it  is  quite 
elementary  that  such  officials  could  not,  by  departing 
from  official  probity  and  duty  in  the  field  of  govern- 
mental activity,  convert  themselves  into  private  cor- 
porate agents,  with  capacity  to  bind  the  corporation 
in  pecuniary  damages." 

§  III.  Municipal  conditions  must  be  reasonable 
and  not  arbitrary. — The  case  of  New  Hope  Tel.  Co. 
V.  Concordia,  81  Kans.  514,  106  Pac.  35,  decided  in 
1910,  indicates  the  limitation  which  the  court  places 
on  the  power  vested  in  the  city  of  imposing  conditions 
by  way  of  regulation  in  granting  its  consent  to  a 
municipal  public  utility  to  the  effect  that  the   condi- 


149  "^^^   FRANCHISE.  §  112 

tions  must  be  reasonable  and  that  the  consent  can  not 
be  withheld  arbitrarily  because  such  action  would  nul- 
lify the  rights  granted  by  the  state.  As  the  court 
expresses  it:  "No  company  should  undertake  to  enter 
a  city  and  erect  poles  and  string  wires  over  or  along 
streets,  alleys,  or  public  grounds  without  making  ap- 
plication and  a  proper  effort  to  procure  the  passage 
of  an  ordinance  defining  the  manner  and  place  of  con- 
struction of  the  contemplated  lines.  Such  an  appli- 
cation the  council  may  not  deny.  It  may  regulate, 
but  not  exclude.  The  telephone  companies  get  the 
right  directly  from  the  state,  and  not  from  the  city. 
The  city  may  prescribe  terms  and  conditions  upon 
which  the  right  granted  by  the  state  shall  be  exer- 
cised, but  it  has  no  power  to  annul  the  right  granted 
by  the  higher  authority." 

§  112.  State  interest  and  regulation  controls  mu- 
nicipal.— This  same  principle  is  decided  with  a  differ- 
ent application,  indicating  that  it  is  a  practical  neces- 
sity as  well  as  a  sound  principle  of  law,  in  the  case  of 
Wichita  v.  Old  Colony  Trust  Co.,  132  Fed.  641,  de- 
cided in  1904,  where  the  court  held  that  the  city  could 
not  withhold  its  consent  or  impose  unreasonable  or 
prohibitory  conditions  on  granting  its  consent  to  a 
telephone  company  whose  operations  were  national  in 
their  scope.  This  feature  of  the  case  illustrates  the 
necessity  of  limiting  a  municipality  so  that  local  in- 
terest will  not  unduly  interfere  with  state  or  national 
agencies.  Nor  is  this  principle  limited  in  its  applica- 
tion to  the  telephone  for  the  telegraph  and  certain 
electric  lines  as  well  as  other  municipal  public  utili- 
ties are  not  limited  to  any  particular  locality  so  that 
the  policy  controlling  their  operation  can  not  be  merely 
local  in  its  nature.  The  general  welfare  of  all  con- 
cerned must  be  the  test  of  the  control  exercised  and 


§112  PUBLIC    UTILITIES.  1 50 

limits  the  power  of  any  locality  to  regulate  the  par- 
ticular public  utility.  As  the  court  expresses  it  in  the 
case  just  cited:  "Local  telephone  exchanges  are  com- 
ing to  be,  in  relation  to  the  general  telephone  business, 
quite  similar  to  local  telegraph  offices  with  respect  to 
the  general  telegraph  system.  The  long-distance  tele- 
phone is  becoming  national  in  its  scope.  We  feel  jus- 
tified in  holding  that  the  legislature  of  Kansas  did  not 
intend  to  vest  in  any  municipality  power  to  destroy 
a  general  system  of  telephone  exchanges,  extending 
not  only  over  the  entire  state,  but  over  several  states. 
The  state  as  a  whole  is  interested  in  the  subject,  as 
well  as  the  city. 

"Furthermore,  the  extraordinary  power  which  the 
mayor  and  council  of  the  city  of  Wichita  are  seeking 
to  exercise  is  such  as  can  only  be  sustained  when  rest- 
ing upon  unquestioned  right.  The  local  telephone  ex- 
change of  the  Kansas  &  Missouri  Telephone  Company 
has  existed  in  that  city  for  nearly  twenty  years.  It 
has  been  built  up  gradually.  It  represents  an  invest- 
ment of  many  thousands  of  dollars.  The  municipal 
authorities  claim  the  power  to  destroy  this  large  prop- 
erty. Their  contemplated  action  can  have  no  other 
result.  A  telephone  exchange  is  not  movable  prop- 
erty. To  remove  it  is  to  destroy  it.  The  city  makes 
no  complaint  that  the  telephone  corporation  has  not 
promptly  and  faithfully  complied  with  all  municipal 
regulations.  It  claims  the  right  not  to  regulate,  but 
to  expel.  It  is  our  conclusion  that  it  does  not  possess 
that  power." 

A  succinct  statement  of  this  principle  of  limitation 
placed  upon  the  municipality  is  furnished  in  the  case 
of  IndianapoHs  v.  Indianapolis  Gas-Light  &  Coke  Co., 
66  Ind.  396,  decided  in  1879,  '^^  the  expression:  "That 
a  municipality  can  not  abridge  its  legislative  power  by 
contract,  and  that  it  can  not  impair  a  contract  by  its 


151  THE   FRANCHISE.  §  II3 

legislative  power,  that  a  municipality  can  not  make  a 
valid  contract  beyond  its  power  to  contract,  and  that 
a  contract  made  within  its  power  to  contract  is  valid." 

§  113.  Municipal  regulation  once  provided  is  final 
and  binding. — By  way  of  defining  and  illustrating  the 
power  reserved  in  the  city  under  the  police  power  the 
case  of  Indianapolis  v.  Consumers'  Gas  Trust  Co.,  140 
Ind.  107,  39  N.  E.  433,  decided  in  1895,  correctly  .ex- 
presses the  rule  of  law  to  the  effect  that  when  the 
municipality  gives  its  consent  to  the  installing  and 
operation  of  a  municipal  public  utility  plant  and  pro- 
vides as  a  condition  of  such  consent  that  a  bond  be 
given  to  the  effect  that  the  condition  of  the  streets 
will  be  maintained  as  found  in  connection  with  the 
laying  of  pipes,  the  municipality  can  not  thereafter 
require  the  securing  of  a  further  permit  from  the  city 
and  the  furnishing  of  another  bond  by  way  of  addi- 
tional security  that  the  streets  will  be  maintained  in 
the  original  condition,  for  the  reason  that  the  condi- 
tions first  exacted  covered  the  case  and  provided  all 
the  necessary  precaution  intended  to  be  secured  by 
the  later  ordinance  requiring  the  additional  consent 
and  security.  In  the  course  of  its  decision  the  court 
observes:  "Is  the  ordinance  of  1890  a  valid  exercise 
of  the  police  power,  which  the  city  did  not  surrender 
in  granting  to  appellee  the  franchise  in  question? 
There  was  no  compulsion  on  the  part  of  the  appellant 
to  grant  the  privilege  to  use  its  streets  to  any  partic- 
ular company.  It  was  within  its  discretion  to  give  or 
not  to  give  its  consent,  and  it  had  the  right  to  with- 
hold it  from  all  gas  companies.  Gas  &  Min.  Co.  v. 
Town  of  Elwood,  114  Ind.  332,  16  N.  E.  624.  It  was 
not  limited  alone  to  the  granting  of  this  franchise,  but 
it  had  the  right  to  prescribe  and  impose  terms  and 
conditions.      Dill.    Mun.    Corp.    section    706;    2    Wood, 


§  114  PUBLIC    UTILITIES.  1 52 

Ry.  Law,  p.  986;  Elliott,  Roads  &  S.  p.  565.  When 
these  terms  and  conditions  proposed  by  appellant  were 
accepted  by  the  appellee,  and  complied  with,  it  be- 
came a  binding  contract.  Western  P.  &  S.  Co.  v. 
Citizens'  St.  R.  Co.,  128  Ind.  531,  26  N.  E.  188,  and 
28  N.  E.  88.  But  the  appellant  contends  that  such 
grants  are  but  the  exercise  of  police  power,  and  may 
be  changed  or  repealed  by  the  granting  power.  .  .  . 
We  are  constrained  to  hold  that  the  ordinance  of  1890 
is  inoperative  and  void,  so  far  as  it  may  be  invoked 
to  abridge  or  restrict  appellee  in  the  exercise  of  the 
rights  and  privileges  acquired  by  it  under  the  ordi- 
nance of  1887.  In  consonance  with  reason,  it  can  not 
be  held  that  the  appellee,  which  had  already  obtained 
the  consent  of  the  city  by  virtue  of  the  ordinance  last 
mentioned,  must  be  required  to  secure  a  new  consent." 

§  114.  Municipal  consent  when  accepted  creates 
binding  contract. — That  the  city  may  not  in  the  exer- 
cise of  its  police  power  giving  it  the  right  to  regulate 
a  business  in  effect  prohibit  the  carrying  on  of  a  busi- 
ness which  has  been  duly  authorized,  although  the  con- 
sent of  the  city  when  first  granted  was  a  mere  license, 
because  in  pursuance  of  such  consent  the  corporation 
providing  the  public  utility  had  made  substantial  in- 
vestments which  would  be  lost  to  them  if  the  right 
was  revoked,  is  the  effect  of  the  decision  in  the  case 
of  Chicago  v.  Chicago  &  O.  P.  Elevated  R.  Co.,  250 
111.  486,  95  N.  E.  456,  decided  in  191 1,  where  the  court 
says:  "The  privilege  of  the  use  of  the  public  streets 
of  the  city  or  town,  when  granted  by  ordinance,  is 
not  always  a  mere  license,  revocable  at  the  pleasure 
of  the  municipality  granting  it,  for,  if  the  grant  is  for 
an  adequate  consideration  and  is  accepted  by  the  gran- 
tee, then  the  ordinance  ceases  to  be  a  mere  license, 
and  becomes   a  valid   and   binding  contract;   and   the 


153  "^^^   FRANCHISE.  §  1 15 

same  result  is  reached  where,  in  case  of  a  mere  Hcense, 
it  is,  prior  to  its  revocation,  acted  upon  in  some  sub- 
stantial manner,  so  that  to  revoke  it  would  be  in- 
equitable and  unjust.  Chicago  Municipal  Gaslight  Co. 
V.  Town  of  Lake,  130  III.  42,  22  N.  E.  616;  City  of 
Bellville  v.  Citizens'  Horse  Ry.  Co.,  152  111.  171,  38 
N.  E.  584,  26  L.  R.  A.  681 ;  People  v.  Blocki,  203  111. 
363,  67  N.  E.  809.  .  .  .  The  right  of  the  city,  by 
the  exercise  of  its  police  power,  to  regulate  any  busi- 
ness or  the  use  of  any  property  does  not  give  the 
power  to  prohibit  the  conducting  of  a  lawful  business, 
or  to  suppress  entirely  the  use  of  property.  Town  of 
Lake  View  v.  Rose  Hill  Cemetery  Co.,  70  111.  191,  22 
Am.  Rep.  71;  City  of  Chicago  v.  Gunning  System,  214 
111.  628,  73  N.  E.  1035,  70  L.  R.  A.  230. 

"It  is  contended  by  appellant  that  it  has  the  power 
to  declare  such  a  situation  as  is  here  presented  to  be 
a  nuisance  and  to  suppress  the  same.  Appellee  is  con- 
ducting its  business  in  accordance  with  the  grant  made 
originally  by  the  town  of  Cicero.  It  constructed  its 
road  by  authority  of  law,  and  is  operating  it,  under 
the  terms  of  the  grant,  for  the  accommodation  of  the 
public.  The  city  can  not,  by  a  mere  declaration,  show 
the  operation  of  the  appellee's  road  through  the  ter- 
ritory in  question  to  be  a  nuisance,  and  subject  its 
tracks  to  removal.  The  public  welfare  demands  that 
there  should  not  be  a  discontinuance  of  the  operation 
of  an  authorized  railroad." 

§  115.  Vested  interests  and  contract  rights  not 
subject  to  impairment  by  later  constitutional  provi- 
sions.— Nor  can  contract  rights  and  interests  that  are 
vested  by  virtue  of  installing  public  utility  plants  under 
such  rights  be  destroyed  or  interfered  with  even  by  a 
constitutional  provision  of  the  state.  The  rule  pro- 
hibiting the  impairment  of  contract  rights  is  based  on 


§115  PUBLIC    UTILITIES.  1 54 

the  federal  constitution,  which  is  superior  to  the  state 
constitution  as  well  as  to  a  statute  or  ordinance.  In 
the  case  of  New  Orleans  Gas  Light  Co.  v.  Louisiana 
Light,  &c.,  Mfg.  Co.,  115  U.  S.  650,  29  L.  ed.  516,  de- 
cided in  1885,  the  court  held  that  a  constitutional  pro- 
vision against  the  granting  of  monopolies  or  exclusive 
privileges  did  not  have  the  effect  of  destroying  or 
impairing  the  special  privilege  of  conducting  such  a 
monopoly  and  enjoying  an  exclusive  privilege  by  vir- 
tue of  a  franchise  granted  and  accepted  prior  to  the 
constitutional  provision,  the  court  saying:  "The  plain- 
tiff claims  to  be  entitled,  for  the  term  of  fifty  years 
from  April  i,  1875,  to  the  sole  and  exclusive  privilege 
of  manufacturing  and  distributing  gas  in  that  city  by 
means  of  pipes,  mains,  and  conduits  laid  in  its  streets, 
to  such  persons  or  corporate  bodies  as  may  choose  to 
contract  for  the  same.  .  .  .  The  article  in  the  State 
Constitution  of  1879  in  relation  to  monopolies  is  not, 
in  any  legal  sense,  an  exercise  of  the  police  power  for 
the  preservation  of  the  public  health,  or  the  promotion 
of  the  public  safety;  for  the  exclusiveness  of  a  grant 
has  no  relation  whatever  to  the  public  health,  or  to  the 
public  safety.  These  considerations  depend  upon  the 
nature  of  the  business  or  duty  to  which  the  grant  re- 
lates, and  not  at  all  upon  the  inquiry  whether  a  fran- 
chise is  exercised  by  one  rather  than  by  many.  The 
monopoly  clause  only  evinces  a  purpose  to  reverse  the 
policy  previously  pursued  of  granting  to  private  cor- 
porations franchises  accompanied  by  exclusive  privi- 
leges, as  a  means  of  accomplishing  pubHc  objects. 
That  change  of  policy,  although  manifested  by  con- 
stitutional enactment,  can  not  affect  contracts  which, 
when  entered  into,  were  within  the  power  of  the  state 
to  make,  and  which,  consequently,  were  protected 
against  impairment,  in  respect  of  their  obligation,  by 
the    Constitution   of   the   United   States.      A   state  can 


155  THE   FRANCHISE.  §  n6. 

no  more  impair  the  obligation  of  a  contract  by  her 
organic  laws  than  by  legislative  enactment;  for  her 
constitution  is  a  law  within  the  meaning  of  the  con- 
tract clause  of  the  National  Constitution.  And  the 
obligation  of  her  contracts  is  as  fully  protected  by 
that  instrument  against  impairment  by  legislation  as 
are   contracts   between   individuals  exclusively." 

§  ii6.  Franchise  rights  may  be  modified  by  mu- 
tual agreements. — The  parties  to  the  franchise  con- 
tract may  as  a  matter  of  course  modify  it  by  mutual 
agreement,  and  after  having  agreed  to  exchange  one 
franchise  for  another,  or  having  accepted  an  extension 
of  a  franchise,  the  municipal  public  utility  can  not 
question  the  conditions  of  the  second  franchise  or  the 
terms  upon  which  the  extension  was  granted  and  ac- 
cepted, for  as  the  court  in  the  very  recent  decision  of 
Public  Service  Commission  v.  Westchester  St.  R.  Co., 
206  N.  Y.  209.  99  N.  E.  536,  decided  October  i.  191 2, 
says:  "When  the  village  granted  appellant's  prede- 
cessor an  extension  of  its  franchise,  it  had  the  right, 
as  a  consideration  therefor,  to  exact  suitable  condi- 
tions and  agreements  from  the  company  in  the  interest 
of  its  inhabitants.  There  is  no  doubt  that  the  rate  of 
fare  to  be  charged  to  and  from  points  in  the  village 
was  a  matter  of  such  municipal  and  public  interest 
that  the  municipal  authorities  might  bargain  with  ref- 
erence thereto.  Therefore  the  grant  of  the  new  fran- 
chise on  the  condition  and  consideration,  amongst 
others,  of  a  five-cent  fare  between  the  points  now  in- 
volved, and  the  acceptance  by  the  company  thereof 
and  its  agreement  to  observe  all  the  'conditions,  regu- 
lations and  restrictions'  thereof,  made  a  valid  con- 
tract." 


CHAPTER  VIII. 

NO   EXCLUSIVE   FRANCHISE   UNDER 
IMPLIED  POWER. 

Section. 

117.  All  power  of  municipality  derived  from  state. 

118.  No  implied  power  in  municipality  to  grant  exclusive  franchises. 

119.  Franchises  not  exclusive  to  avoid  monopolies. 

120.  Duration  of  franchise. 

121.  The  control  of  competition. 

122.  Competitor  not  excluded  by  unauthorized  exclusive  franchises. 

123.  Power  to  grant  franchises  strictly  construed, 

124.  Monopolies  held  contrary  to  public  interest. 

125.  Strict  construction  of  statutory  authority  excludes  implication. 

126.  Conditional  grants   of  exclusive  franchises  construed   strictly. 

127.  The  municipality  an  agent  of  the  state. 

128.  Constitutional  provision  limits  grant  by  state. 

129.  Municipal  control  of  streets  impaired  by  exclusive  franchises. 

130.  Exclusive  franchise  prevents  municipal  control. 

131.  Exclusive  franchise  held  unnecessary. 

§  117.  All  power  of  municipality  derived  from 
state. — Unless  clearly  authorized  to  do  so  by  the  state 
in  connection  with  the  power  conferred  by  it  upon 
municipal  corporations  to  grant  special  privileges  in 
the  nature  of  franchise  rights  to  municipal  public  util- 
ities, municipal  corporations  are  not  authorized  to 
make  their  grants  of  such  rights  or  special  privileges 
exclusive.  As  before  stated,  the  state  has  exclusive 
control  over  its  highways,  including  the  streets  of 
municipal  corporations,  and  this  control  remains  ex- 
clusively in  the  state  except  in  so  far  as  it  may  be 
delegated  to  the  municipahty,  which  accordingly  has 
only  so  much  power  to  control  the  streets  and  grant 
special  privileges  for  their  use  as  has  been  clearly  con- 
ferred upon  it  by  legislative  authority. 
156 


\ 


157  EXCLUSIVE   FRANCHISE IMPLIED   POWER.  §  1 18 

§  118.  No  implied  power  in  municipality  to  grant 
exclusive  franchises. — When  the  exploitation  of  mu- 
nicipal public  utilities  was  undertaken  in  this  country- 
it  was  believed  that  competition  would  secure  to  the 
public  efficient  service  at  reasonable  rates  from  the 
private  corporations  which  were  intrusted  with  their 
operation.  The  courts  accordingly  have  from  the  first 
attempted  to  formulate  the  law  in  such  a  way  that 
monopolies  might  not  develop  and  that  competition 
might  be  maintained  for  the  purpose  of  providing  the 
necessary  regulation  and  control.  This  was  the  first 
reason  and  has  remained  the  controlling  purpose  of 
the  courts  in  holding  that  municipal  corporations,  in 
the  absence  of  statutory  authorization,  may  not  grant 
exclusive  franchises  for  the  ownership  and  operation 
of  municipal  public  utilities. 

§  119.  Franchises  not  exclusive  to  avoid  monopo- 
lies.— As  already  indicated,  many  of  our  courts  have 
been  inclined  to  recognize  that  municipal  ccrporations 
have  the  power  necessary  to  permit  them  to  own  and 
operate  municipal  public  utilities  or  to  lease  their  pub- 
lic utilities  to  private  concerns,  and  thus  regulate  the 
service  rendered  and  retain  control  for  the  benefit  and 
advantage  of  themselves  as  well  as  that  of  their  citi- 
zens. This  is  the  position  which  many  courts  have 
taken,  not  only  for  the  purpose  of  preventing  monop- 
olies, but  to  avoid  the  disadvantages  incident  to  the 
exercise  of  exclusive  rights  by  private  corporations 
which  the  courts  recognize  are  naturally  actuated 
primarily  by  the  motive  of  gain  rather  than  public 
service.  This  same  purpose  of  maintaining  competi- 
tive conditions  by  excluding  monopoly  features  and 
prohibiting  the  granting  of  exclusive  privileges  except 
on  clear  authority  has  actuated  the  courts  when  they 
have  been  called  upon  to  determine  the  legal  relations 


§  I20  PUBLIC  UTILITIES.  1 58 

which  should  exist  between  municipaHties  and  private 
corporations  in  those  cases  where  it  has  been  decided 
or  found  necessary  to  adopt  the  poHcy  of  private 
ownership  and  operation. 

§  120.  Duration  of  franchise. — In  the  absence  of 
municipal  ownership  of  plants  supplying  these  public 
utilities  it  is  necessary  to  depend  upon  private  initia- 
tive for  the  service;  and  the  erection  and  maintenance 
of  such  systems  require  so  large  an  investment  that 
private  capital  will  not  undertake  such  enterprises 
under  franchises  running  for  unreasonably  short  peri- 
ods of  time. 

§  121.  The  control  of  competition. — It  is  necessary 
therefore  to  grant  rather  long  term  franchises  before 
private  capital  will  consent  to  launch  such  a  business 
which  requires  a  large  and  a  long-time  investment, 
because,  as  will  be  shown  later,  the  property  so  used 
can  not  be  easily  turned  or  converted  into  cash  unless 
the  statute  expressly  permits  of  its  sale  and  transfer 
to  another,  or  unless  the  municipality  itself  be  the 
purchaser.  To  the  extent  that  it  is  necessary  to  ar- 
range for  the  providing  of  such  service  by  private 
capital,  there  is  necessarily  a  loss  of  the  control  in  the 
municipality  that  goes  with  ownership.  Notwithstand- 
ing, where  it  is  found  necessary  to  depend  on  private 
interests  for  these  services,  the  courts  concede  to  mu- 
nicipal corporations  the  power  by  implication  to  grant 
the  necessary  franchises  for  the  supply  of  such  public 
utilities  for  a  limited  period;  but  in  doing  so,  they 
hold  strictly  that  such  power  does  not  include  the 
granting  of  exclusive  privileges  for  rendering  such 
service.  By  means  of  this  reservation  greater  control 
is  saved  to  the  municipality  since  future  competition 
remains  available  as  a  means  of  regulating  the  supply 


I 


159  EXCLUSIVE   FRANCHISE IMPLIED   POWER.  §  121 

from  private  sources.  But  experience  has  shown  that 
this  method  of  control  is  often  inadequate  and  unsat- 
isfactory for  the  reason  that  providing  the  service  of 
these  public  utilities  is  concerned  with  the  supplying 
of  natural  monopolies,  for  which,  as  will  be  more  fully 
discussed  later,  competition  can  not  provide  the  nec- 
essary regulation   and   control.^ 

1  ALABAMA.— Birmingham  &  Pratt  Mines  St.  R.  Co  v.  Birming- 
ham St.  R.  Co.,  79  Ala.  465,  58  Am.  Rep.  615;  Gadsden  v.  Mitchell, 
145  Ala.  137,  40  So.  557,  6  L.  R.  A.  (N.  S.)  781,  117  Am.  St.  20;  Mont- 
gomery Light  &  W.  P.  Co.  V.  Citizens'  Light,  H.  &  P.  Co.,  142  Ala. 
462,  38  So.  1026. 

CALIFORNIA.— Pereria  v.  Wallace,  129  Cal.  397,  62  Pac.  61. 

CONNECTICUT.— Norwich  Gas  Light  Co.  v.  Norwich  City  Gas 
Co.,  25  Conn.  19. 

FEDERAL.— Grand  Rapids  E.  L.  &  P.  Co.  v.  Grand  Rapids  E. 
E.,  &c.,  Co.,  33  Fed.  659;  Jackson  County  Horse  R.  Co.  v.  Interstate 
Rapid  Transit  R.  Co.,  24  Fed.  306;  Logansport  R.  Co.  v.  Logansport, 
114  Fed.  688,  192  U.  S.  604,  48  L.  ed.  584;  National  Foundry  &  Pipe 
Works  Co.  V.  Oconto  Water  Co.,  52  Fed.  29;  New  Orleans  City  R. 
Co.  V.  Crescent  City  R.  Co.,  12  Fed.  308;  Water,  Light  &  Gas  Co.  v. 
Hutchinson,  144  Fed.  256,  207  U.  S.  385,  52  L.  ed.  257;  Westerly 
Waterworks  v.  Westerly,  75  Fed.  181. 

FLORIDA.— Capital  City  L.  &  F.  Co.  v.  Tallahassee,  42  Fla. 
462,  28  So.  810,  186  U.  S.  401,  46  L.  ed.  1219;  Florida  Cent.  &  P.  R. 
Co.  V.  Ocala  St.  &  S.  R.  Co.,  39  Fla.  306,  22  So.  692. 

ILLINOIS.— Chicago  Tel.  Co.  v.  Northwestern  Tel.  Co.,  199  111. 
324,  65  N.  E.  329. 

INDIANA.— Citizens'  Gas  &  Mining  Co.  v.  Elwood,  114  Ind.  332, 
16  N.  E.  624;  Crowder  v.  Sullivan,  128  Ind.  486,  28  N.  E.  94,  13  L. 
R.  A.  647. 

IOWA.— Logan  v.  Pyne,  43  Iowa  524,  22  Am.  Rep.  261. 

LOUISIANA.— Canal  &  C.  St.  R.  Co.  v.  Crescent  City  R.  Co.,  41 
La.  Ann.  561,  6  So.  849;  New  Orleans  City  &  L.  R.  Co.  v.  New  Or- 
leans, 44  La.  Ann.  72S,  11  So.  78. 

MICHIGAN.— Detroit  Citizens'  St.  R.  Co.  v.  Detroit  R.,  110 
Mich.  384,  68  N.  W.  304,  35  L.  R.  A.  859,  64  Am.  St.  350,  171  U.  S. 
48,  43  L.  ed.  67;  Gale  v.  Kalamazoo,  23  Mich.  344,  9  Am.  Rep.  80. 

MINNESOTA.— Long  v.  Duluth,  49  Minn.  280,  51  N.  W.  913,  32 
Am.  St.  547. 

MISSOURL— Kirkwood  v.  Meramec  Highlands  Co..  94  Mo.  App. 
637,  68  S.  W.  761. 

NEBRASKA.— May  v.  Gothenburg,  88  Nebr.  772,  130  N.  W.  566. 


§  122  PUBLIC  UTILITIES.  l60 

§  122.  Competitor  not  excluded  by  unauthorized 
exclusive  franchises. — A  discussion  of  some  of  the  lead- 
ing cases  on  this  general  question  will  serve  to  make 
these  statements  more  authoritative  and  w^ill  illustrate 
more  fully  the  force  and  practical  effect  of  the  princi- 
ples herein  enunciated.  The  general  principle  is  clear- 
ly expressed  in  the  case  of  Clarksburg  Electric  Light 
Co.  V.  Clarksburg,  47  W.  Va.  739,  35  S.  E.  994,  50 
L.  R.  A.  142,  decided  in  1900,  in  which  the  complain- 
ant claimed  the  exclusive  right  to  use  the  streets  of 
the  defendant  city  for  operating  an  electric  light  plant 
by  virtue  of  a  franchise  granted  by  said  city  and  made 
in  terms  exclusive.  In  refusing  relief  to  the  action 
which  was  to  enjoin  the  erection  of  a  competitive  elec- 
tric light  system  in  said  city  the  court  spoke  in  the 
following  manner:  "Surely,  we  can  not  say,  contrary 
to  the  drift  of  all  the  law  of  the  country,  that  the  mere 
power  to  control  streets  and  light  the  same  carries 
with  it  by  implication  the  enormous  power  to  tie  the 
hands  of  an  important  municipality  for  many  years, 
or  that  such  a  power  is  indispensable  or  necessary  to 
enable  the  municipality  to  carry  out  its  legitimate 
functions.  Therefore,  the  council  of  Clarksburg  had 
no    authority    to    grant    this    exclusive    franchise ;    and 

NEW  YORK.— Parfitt  v.  Ferguson,  159  N.  Y.  Ill,  53  N.  E.  707; 
Potter  V.  CoUis,  156  N.  Y.  16,  50  N.  E.  413;  Syracuse  Water  Co.  v. 
Syracuse,  116  N.  Y.  167,  22  N.  E.  381,  5  L.  R.  A.  546,  154  U.  S.  519, 
38  L.  ed.  1077. 

NORTH  CAROLINA.— Thrift  v.  Elizabeth  City,  122  N.  Car.  31, 
30  S.  E.  349,  44  L.  R.  A.  427. 

OREGON.— Parkhurst  v.  Salem,  23  Ore.  371,  32  Pac.  304. 

RHODE  ISLAND.— Smith  v.  Westerly,  19  R.  I.  437,  35  Atl.  526. 

UNITED  STATES.— Freeport  Water  Co.  v.  Freeport,  180  U.  S. 
587,  45  L.  ed.  679;  Joplin  v.  Southwest  Missouri  Light  Co.,  191  U. 
S.  150,  48  L.  ed.  127. 

WEST  VIRGINIA.— Clarksburg  Electric  Light  Co.  v.  Clarksburg, 
47  W.  Va.  739,  35  S.  E.  994,  50  L.  R.  A.  142;  Parkersburg  Gas  Co.  v. 
Parkersburg,  30  W.  Va.  435,  4  S.  E.  650. 


l6l  EXCLUSIVE  FRANCHISE IMPLIED   POWER.  §  I23 

that  feature  of  its  ordinance  is  ultra  vires,  and  there- 
fore void,  confers  no  right   [and]   makes  no  contract." 

§  123.  Power  to  grant  franchises  strictly  con- 
strued.— In  the  case  of  Smith  v.  Westerly,  19  R.  I.  437, 
35  Atl.  526,  decided  in  1896,  the  court,  in  construing 
a  statute  empowering  any  city  or  town  to  grant  to  any 
person  or  corporation  the  right  to  erect  water-works 
therein  to  supply  its  inhabitants  with  water,  said:  "It 
will  be  seen  at  once  that,  in  attempting  to  grant  to 
said  company  the  exclusive  right  to  lay  water  pipes  in 
the  public  highways  of  the  said  town,  the  town  coun- 
cil exceeded  the  authority  conferred  by  said  statute, 
and  hence  that  the  town  is  not  bound  by  said  contract; 
for,  however,  it  may  be  as  respects  the  power  of  the 
legislature  to  make  such  a  grant  exclusive,  it  is  clear 
that  no  such  power  can  be  exercised  by  a  town  coun- 
cil unless  it  is  conferred  by  express  words  or  by  neces- 
sary implication." 

§  124.     Monopolies  held  contrary  to  public  interest. 

— The  law  on  this  question  is  shown  to  be  fundamental 
and  of  long  standing  in  the  opinion  of  the  court  of 
North  Carolina,  in  the  case  of  Thrift  v.  Elizabeth 
City,  122  N.  Car.  31,  30  S.  E.  349.  44  L.  R.  A.  427. 
In  construing  a  municipal  ordinance  the  court  said: 
"Those  provisions  of  the  ordinance  granting  the  ex- 
clusive privilege  to  construct  and  maintain  water- 
works within  the  corporate  limits  of  the  town,  and 
the  exclusive  use  of  its  streets,  alleys,  sidewalks,  pub- 
lic grounds,  streams,  and  bridges,  come  within  the 
condemnation  of  sec.  i  of  the  constitution  of  this 
state,  which  declares  that  'perpetuities  and  monopolies 
are  contrary  to  the  genius  of  a  free  state,  and  ought 
not  to  be  allowed.'     .     .     .     All  authorities  hold  that 

11— Pub.  ut. 


§125  PUBLIC  UTILITIES.  162 

no  such  exclusive  privilege  can  be  granted  by  a  munic- 
ipal corporation  w^ithout  express  legislative  authority." 
The  case  of  Citizens'  Gas  &  Mining  Co.  v.  El- 
w^ood,  114  Ind.  332,  16  N.  E.  624,  is  also  a  w^ell  rea- 
soned decision  on  this  principle  of  law  where  it  is 
said:  "The  town  trustees  had  no  authority  to  grant 
the  Elwood  Natural  Gas  and  Oil  Company  the  ex- 
clusive right  to  use  the  streets  of  the  town.  A  mu- 
nicipal corporation  can  not  grant  to  any  fuel  or  gas 
supply  company  a  monopoly  of  its  streets.  There  is 
nothing  in  the  nature  or  business  of  such  a  company 
making  its  use  of  the  streets  necessarily  exclusive. 
The  spirit  and  policy  of  the  law  forbid  municipal  cor- 
porations from  creating  monopolies,  by  favoring  one 
corporation  to  the  exclusion  of  others.  It  is  probably 
true  that  a  municipal  corporation  may  make  a  con- 
tract with  a  gas  company  for  supplying  light  to  the 
public  lamps  for  a  limited  time,  even  though  it  be  for 
a  number  of  years ;  on  this  point,  however,  there  is 
some  conflict,  but  there  is  no  conflict  on  the  proposi- 
tion that,  in  the  absence  of  express  legislative  au- 
thority, a  municipal  corporation  can  not  grant  to  any 
corporation  the  exclusive  privilege  of  using  its  streets." 

§  125.  Strict  construction  of  statutory  authority 
excludes  implication. — And  the  Supreme  Court  of  the 
United  States  in  the  case  of  Freeport  Water  Co.  v. 
Freeport,  180  U.  S.  587,  45  L.  ed.  679,  has  said:  "The 
power  of  a  municipal  corporation  to  grant  exclusive 
privileges  must  be  conferred  by  explicit  terms.  If 
inferred  from  other  power,  it  is  not  enough  that  the 
power  is  convenient;  it  must  be  indispensable  to 
them." 

That  the  general  rule  is  in  favor  of  the  strict 
construction  of  the  grant  of  power  to  the  municipality 
in  this  connection  and  that  the  exercise  of  such  power 


163  EXCLUSIVE   FRANCHISE — IMPLIED   POWER.  §  1 26 

when  granted  to  the  municipality  does  not  necessitate 
its  giving  exclusive  privileges  as  an  element  of  its 
special  franchise  is  well  stated  in  the  case  of  Water, 
Light  &  Gas  Co.  v.  Hutchinson,  207  U.  S.  385,  52  L. 
ed.  257,  decided  in  1907,  as  follows:  "The  city,  it  is 
clear,  in  express  terms  and  for  consideration  received, 
granted  exclusive  rights.  The  power  of  the  city  to 
do  this  is  denied,  and  this  makes  the  question  in  the 
case.  The  circuit  court  ruled  against  the  existence  of 
the  power,  applying  to  the  statutes  conferring  power 
upon  the  municipalities  of  the  state  the  rule  of  strict 
construction.  The  ruling  is  challenged  by  appellants, 
and  it  is  contended  that  the  general  welfare  clause 
and  'the  municipal  power  to  furnish  light  carries  with 
it  the  obligation  to  enter  into  all  contracts  and  to 
exercise  all  subsidiary  powers  which  the  circum- 
stances of  the  case  require.'  " 

In  refusing  to  find  power  in  the  city  to  grant  ex- 
clusive franchises  the  court  said:  "A  grant  of  power 
to  confer  such  privilege  is  not  necessarily  a  grant  of 
power  to  make  it  exclusive.  To  hold  otherwise 
would  impugn  the  cited  cases  and  their  reasoning. 
It  would  destroy  the  rule  of  strict  construction.  The 
foundation  of  that  rule  requires  the  grant  of  such 
power  to  be  explicit  or,  if  inferred  from  other  powers 
or  purposes,  to  be  not  only  convenient  to  them,  but 
indispensable  to  them." 

§  126.     Conditional   grants   of   exclusive   franchises 

construed  strictly. — \Miere  the  right  to  grant  exclu- 
sive franchises  is  expressly  conferred  on  the  munici- 
pality subject  to  any  material  condition,  the  courts 
will  give  full  force  and  effect  to  the  condition  by  hold- 
ing that  the  grant  is  void  and  of  no  effect  and  that  it 
confers  no  special  privilege  or  right  unless  the  condi- 
tion   is    performed.      As    it    is    stated    in    the    case    of 


§  127  PUBLIC  UTILITIES.  164 

Westerly  Waterworks  v.  Westerly,  75  Fed.  181,  de- 
cided in  1896:  "It  is  to  be  observed  that  there  is 
strong  authority  for  the  proposition  that  general  pow- 
ers, such  as  are  here  granted,  do  not  include  the  power 
to  grant  exclusive  rights.  .  .  .  But  a  reading  of 
chapter  975  shows  that  the  contracts  which  town 
councils  may  make  for  exclusive  franchises  are  on 
condition  of  payments  to  be  made  to  the  town  on  the 
amounts  of  earnings  of  the  grantees.  It  seems  to  me 
clear  that  the  town  council  had  no  power  to  ratify  a 
grant  of  an  exclusive  franchise  which  did  not  contain 
such  a  condition.  It  is  to  be  remembered  that,  if 
there  was  a  ratification,  it  would  operate  only  on  this 
exclusive  grant,  since  the  validity  of  the  contract  in 
other  respects  is  admitted,  and,  indeed,  could  hardly 
be  disputed.  I  must  conclude,  therefore,  for  the  pur- 
poses of  this  motion,  that  there  is  here  no  exclusive 
grant." 

§  127.     The  municipality  an  agent  of  the  state. — An 

additional  reason  why  the  courts  limit  the  power  of 
the  city  in  this  respect  to  such  as  is  clearly  conferred 
consists  in  the  fact  that  the  city  acts  merely  as  an 
agent  of  the  state  and  that  as  the  state  alone  has  com- 
plete control  over  the  streets  of  the  city,  the  use  of 
which  naturally  is  essential  to  the  operation  of  the 
municipal  public  utility,  the  municipality  in  exercising 
its  power  to  regulate  the  use  of  its  streets  does  not 
enjoy  the  power  to  grant  the  use  to  any  particular 
public  utility  exclusively;  for  as  the  case  of  Grand 
Rapids  E.  L.  &  P.  Co.  v.  Grand  Rapids  E.  E.,  &c.  Co., 
33  Fed.  659,  decided  in  1888,  expresses  it:  "To  confer 
exclusive  rights  and  privileges  either  in  the  streets  of 
a  city  or  in  the  public  highways,  necessarily  involves 
the  assertion  and  exercise  of  exclusive  powers  and 
control  over  the  same.     Nothing  short  of  the  whole 


165  EXCLUSIVE  FRANCHISE IMPLIED   POWER.  §  12/ 

sovereign  power  of  the  state  can  confer  exclusive 
rights  and  privileges  in  public  streets,  dedicated  or  ac- 
quired for  public  use,  and  which  are  held  in  trust 
for  the  public  at  large.  .  .  .  It  is  perfectly  clear 
that  these  provisions  of  the  charter  confer  no  exclu- 
sive or  sovereign  power  and  control  over  the  streets 
of  the  city.  .  .  .  The  authority  of  a  municipal 
corporation  to  make  contracts  in  respect  to  objects 
intrusted  to  its  administrative  care  and  supervision, 
as  a  local  agency  of  the  state,  is  one  thing,  while  the 
power  to  grant  exclusive  franchises,  which  belongs  to 
the  sovereign,  is  another  and  essentially  different 
matter." 

The  nature  of  the  power  which  the  city  exercises 
in  granting  the  special  privileges  in  the  form  of  a 
franchise  to  the  municipal  public  utility  is  well  de- 
scribed in  the  case  of  Gadsden  v.  Mitchell,  145  Ala. 
137,  40  So.  557,  6  L.  R.  A.  (N.  S.)  781,  117  Am.  St. 
20,  decided  in  1906,  which  was  an  action  to  require 
the  city  to  compel  the  defendant  to  perform  a  con- 
tract for  the  construction  and  operation  of  a  water- 
works system  for  the  benefit  of  the  city  and  its  inhabi- 
tants, where  the  court  said:  "The  making  of  such 
a  contract  is  not  a  delegation  of  a  governmental  func- 
tion, but  is  an  exercise  of  its  business  or  proprietary 
powers.  The  charter  of  the  city  of  Gadsden  confers 
ample  powers  to  authorize  the  making  of  this  con- 
tract. At  any  rate  this  is  one  of  the  incidental  powers 
of  a  municipal  corporation.  There  being  no  limit,  by 
constitution  or  statute,  as  to  the  length  of  time  for 
which  such  contracts  may  be  made,  the  court  can  not 
say  that  the  time  fixed  in  this  contract  is  unreasonable. 
On  the  contrary,  it  is  common  knowledge  that  it  re- 
quires a  considerable  outlay  of  money  to  construct  a 
system  of  water-works,  and  a  considerable  part  of 
the  material  is  buried  under  the  surface  of  the  ground 


§  128  PUBLIC   UTILITIES.  l66 

SO  that  no  arrangement  could  be  made  for  the  con- 
struction of  such  a  system,  unless  the  contract  be 
allowed  to  run  for  a  number  of  years,  so  as  to  offer 
the  hope  of  realizmg  something  on  the  enterprise. 
.  .  .  That  part  of  the  original  contract  which  at- 
tempted to  make  the  franchise  granted  exclusive  is 
violative  of  sec.  22  of  the  Constitution  of  Alabama, 
and  therefore  incapable  of  enforcement." 

§  128.  Constitutional  provision  limits  grant  by 
state. — Some  of  the  state  legislatures  even  do  not 
enjoy  the  power  to  grant  exclusive  franchises  because 
of  constitutional  limitations,  and  the  municipality 
which  acts  as  an  agent  of  such  states  can  not  enjoy 
the  right  to  grant  exclusive  franchises,  although  form- 
ally conferred  upon  it  by  express  statutory  authority. 
This  is  the  effect  of  the  decision  in  the  case  of  Birm- 
ingham &  Pratt  Mines  St.  R.  Co.  v.  Birmingham  St. 
R.  Co.,  79  Ala.  465,  58  Am.  Rep.  615,  decided  in  1885, 
where  the  court  says :  "The  franchise,  it  will  thus  be 
seen,  is  one  not  only  exclusive  in  its  nature,  but  in  per- 
petuity, being  without  limit  of  duration,  except  as  to  an 
option  to  exercise  it,  which  was  to  continue  for  ten 
years.  When  once  put  in  exercise,  it  purports  to^  last 
forever.  .  .  .  The  argument  is  further  made,  that 
the  general  assembly  is  prohibited  by  the  organic  law 
from  making  such  an  irrevocable  grant,  and  therefore 
under  no  circumstances  can  it  be  done  by  a  municipal 
corporation,  which  is  the  mere  agency  of  the  state, 
exercising  only  derivative  powers.  The  power  of 
the  agent,  it  is  said,  can  not  exceed  that  of  the  prin- 
cipal. .  .  .  The  exclusive  right  of  the  appellee  to 
the  privilege  claimed,  in  our  opinion,  can  not  be  sus- 
tained. The  general  assembly  would  itself  have  no 
power  under  the  constitution  to  make  such  a  grant. 
A   fortiori,   a  mere   municipality  would   have   no   such 


167  EXCLUSIVE   FRANCHISE — IMPLIED   POWER.  §  1 28 

power.  Nor  can  we  find,  upon  any  proper  principle 
of  construction,  that  it  has  anywhere  been  attempted 
to  confer  such  a  power  upon  the  municipal  authori- 
ties of  Birmingham." 

The  leading  case  of  Norwich  Gas  Light  Co.  v. 
Norwich  City  Gas  Co.,  25  Conn.  19,  as  early  as  1856, 
defined  this  principle  as  the  controlling  one  for  mu- 
nicipal public  utilities.  In  denying  that  the  claim  of  the 
grantees  to  an  exclusive  franchise  to  lay  gas  pipes  in 
the  streets  and  to  operate  a  system  of  gas  works  in  the 
city  protected  them  from  prosecution  for  maintaining 
a  public  nuisance  for  using  the  streets  in  this  way,  as 
it  gave  them  no  right  or  title  to  the  exclusive  use  of 
the  streets  which  would  prevent  the  defendant,  a  com- 
petitor, from  enjoying  similar  franchise  rights;  for  as 
the  court  said :  "The  resolution  under  which  this 
right  is  claimed,  purports  to  grant  to  Treadway  and 
his  assigns,  for  the  period  of  fifteen  years,  the  right  to 
lay  gas  pipes  in  the  streets;  and  it  declares  that  no 
other  person  or  corporation  shall,  by  consent  of  the 
common  council,  lay  gas  pipes  in  said  streets  during 
that  time.  But  the  city  does  not  own  the  streets, 
.  .  .  And  the  right  of  way  over  them,  being  public 
to  all  who  may  have  occasion  to  use  them,  and  the  only 
power  of  the  city  over  them  being  given  by  their 
charter  in  order  to  regulate  such  use,  it  seems  clear 
that  the  city  can  make  no  grant  which  shall  convey 
to  the  grantee  any  interest  in  them,  which  can,  in  any 
proper  sense,  be  deemed  property.  Besides,  if  the 
resolution  of  the  court  of  common  council  be  viewed 
in  the  light  of  a  grant  of  an  interest  in  the  soil,  it 
should  have  been  perfected  by  a  deed.  No  title,  as 
such,  can  be  transferred  by  a  mere  vote  of  a  corpora- 
tion, which  will  enable  any  one  to  hold  any  perma- 
nent interest  in  real  estate." 


§  129  PUBLIC   UTILITIES.  l68 

§  129.  Municipal  control  of  streets  impaired  by- 
exclusive  franchises. — The  right  of  the  city  to  regu- 
late the  use  of  its  streets  and  to  control  the  exercise 
of  the  special  franchise  privileges  of  municipal  public 
utilities  requires  the  city  to  regulate  such  use  and  the 
enjoyment  of  such  rights  continuously,  which  neces- 
sarily prohibits  it  from  granting  such  exclusive  fran- 
chise rights  to  any  one  because  the  effect  of  such  a 
grant  would  be  to  pass  the  power  of  regulation  and 
control  out  of  the  hands  of  the  municipality  and  confer 
it  upon  the  grantee  of  such  franchise.  The  case  of 
Florida  Cent.  &  P.  R.  Co.  v.  Ocala  St.  &  S.  R.  Co., 
39  Fla.  306,  22  So.  692,  decided  in  1897,  indicates  the 
necessity  for  the  continuous  exercise  by  the  city  of 
this  power  of  control  in  the  following  language :  "We 
discover  no  authority  in  this  provision  for  the  munici- 
pality to  surrender  its  control  over  the  streets  of  the 
city,  or  to  tie  up  its  hands  by  an  exclusive  contract,  so 
as  to  preclude  a  subsequent  council  from  exercising 
the  trust  vested  in  it  over  the  streets  for  the  benefit 
of  the  public.  .  .  .  While  the  ordinance  under 
which  appellee  claims  does  undertake  to  vest  in  it  the 
exclusive  right  to  construct  railroad  tracks  on  all  the 
streets  of  the  city  of  Ocala  as  then  laid  out,  or  that 
might  be  opened  for  a  period  of  ten  years  thereafter, 
we  are  of  the  opinion  that  it  is  void  so  far  as  such 
exclusive  rights  are  concerned,  on  account  of  an 
absence  of  power  in  the  municipality  to  confer  them, 
and  that  it  was  within  the  power  of  a  subsequent  city 
council  to  exercise  such  control  and  regulation  over 
the  streets  as  conferred  by  statute." 

The  case  of  Logan  v.  Pyne,  43  Iowa  524,  22  Am. 
Rep.  261,  decided  in  1876,  indicates  the  reason  of 
public  policy,  for  holding  that  while  the  city  may 
continue  to  exercise  this  power  of  control  it  can  not 
confer  it  on  a  pubHc  utility  by  the  grant  of  an  exclu- 


I 


169  EXCLUSIVE   FRANCHISE IMPLIED   POWER.  §130 

sive  franchise,  for  as  the  court  says:  "A  municipal 
corporation  can  grant,  if  at  all,  exclusive  privileges 
for  the  protection  of  business  which,  without  prohibi- 
tory legislation,  would  be  free  to  all  men,  only  under 
express  legislative  grant  of  power.  Monopolies  being 
prejudicial  to  the  public  welfare,  the  courts  will  not 
infer  grants  thereof,  refusing  to  presume  the  existence 
of  legislative  intention  in  conflict  with  public  policy. 
State  ex  rel.  v.  Cin.  Gas-Light  and  Coke  Co.,  i8  Ohio 
St.  262;  Minturn  v.  Larue,  23  How.  435;  Charles 
River  Bridge  v.  Warren  Bridge,  11  Pet.  420.  .  .  . 
The  grant  of  power  to  license,  tax  and  regulate  omni- 
buses and  other  vehicles,  certainly  can  not  be  con- 
strued into  the  bestowal  of  authority  to  create  monop- 
olies in  their  use.  .  .  .  We  conclude  that  the  char- 
ter of  the  city  of  Dubuque  confers  no  authority  upon 
the  municipal  government  to  grant  the  exclusive  priv- 
ilege of  running  omnibuses  and  other  vehicles,  as  is 
attempted  in  the  ordinance  under  which  the  plaintiffs 
claim  to  recover  in  this  case." 

§  130.  Exclusive  franchise  prevents  municipal  con- 
trol.— The  importance  of  this  rule  of  public  policy 
retaining  in  the  municipality  at  all  times  in  its  full  force 
this  power  to  regulate  and  control  the  municipal  public 
utilities  and  the  streets,  the  use  of  which  is  "so  essen- 
tially necessary  to  the  operation  of  such  public  utilities, 
is  well  stated  in  the  case  of  New  Orleans  City  &  L. 
R.  Co.  V.  New  Orleans,  44  La.  Ann.  728,  11  So.  78, 
decided  in  1892,  as  follows:  "Unless  the  terms  of  the 
delegation  embrace  expressly  the  power  to  grant  ex- 
clusive rights,  or  are  so  sweeping  as  to  operate  a  com- 
plete abdication  of  the  whole  legislative  power  in 
favor  of  the  corporation,  it  can  not  be  held  to  include 
such  extraordinary  power,  the  possession  of  which 
even  by  the  legislature  is  not  free  from  dispute.     See 


§  131  PUBLIC   UTILITIES.  I7O 

Elliott,  Roads  &  S.,  p.  569.  ...  A  different 
conclusion  from  that  which  we  have  reached  would 
be  nothing  less  than  a  public  calamity.  .  .  .  While 
valid  contract  rights  must  be  respected,  or  only  inter- 
fered with  in  the  constitutional  exercise  of  the  power 
of  eminent  domain,  claims  to  exclusive  privileges, 
under  grants  which  are  ultra  vires,  can  not  be  per- 
mitted to  thwart  or  obstruct  the  municipal  discretion 
in  the  administration  of  this  important  public  trust, 
confided  to  them  to  be  exercised  for  the  benefit  of  the 
people." 

A  further  statement  of  this  principle  based  on  the 
same  reasoning  is  furnished  in  the  case  of  Syracuse 
Water  Co.  v.  Syracuse,  116  N.  Y.  167,  22  N.  E.  381, 
5  L.  R.  A.  546,  decided  in  1889,  as  follows:  'The 
municipal  corporation,  as  such,  could  bind  itself  by 
such  contract  only  as  it  was  authorized  by  statute  to 
make.  It  could  not  grant  exclusive  privileges,  espe- 
cially to  put  mains,  pipes,  and  hydrants  in  its  streets; 
nor  could  it  lawfully,  by  contract,  deny  to  itself  the 
right  to  exercise  the  legislative  powers  vested  in  its 
common  council.  It  can  not  well  be  claimed  that 
any  express  power  was  delegated  to  the  municipahty 
to  grant  any  exclusive  franchises ;  and  public  policy 
will  not  permit  the  inference  of  authority  to  make  a 
contract  inconsistent  with  the  continuously  operative 
duty  to  make  such  by-laws,  rules,  and  regulations  as 
the  public  interest  or  welfare  of  the  city  may  require." 

§  131.     Exclusive  franchise  held   unnecessary. — By 

way  of  reply  to  the  claim  that  it  is  necessary  to  grant 
an  exclusive  franchise  to  a  municipal  public  utility  in 
order  to  secure  the  conveniences  of  public  utilities 
which  are  now  regarded  as  necessities,  it  is  shown  in 
the  case  of  Parkersburg  Gas  Co.  v.  Parkersburg,  30 
W.  Va.  435,  4  S.  E.  650,  decided  in  1887,  to  be  limited 


1 71  EXCLUSIVE   FRANCHISE IMPLIED   POWER.  §131 

to  absolute  necessity  as  follows:  "It  is  certainly  not 
essential  or  necessarily  incident  to  the  power,  ex- 
pressly granted,  'to  lay  off  streets,'  etc.,  'and  light  the 
same,'  that  the  city  should  delegate  to  a  private  indi- 
vidual or  corporation  the  exclusive  right  to  furnish 
such  light,  and  use  the  streets  for  that  purpose.  To 
justify  such  a  construction,  it  must  appear  that  in  no 
other  proper  or  reasonable  manner  could  the  city 
provide  lights  for  its  streets  and  inhabitants.  It  not 
only  does  not  so  appear  in  this  instance,  but  we  know 
the  fact  is  otherwise  from  public  history.  ...  It 
would  plainly  be  a  manifest  violation  of  the  cardinal 
principles  above  stated  to  imply  that  the  legislature 
intended  to  confer  upon  the  city  the  power  to  contract 
away  to  a  private  corporation  the  exclusive  right  to 
furnish  such  light,  and  thereby  deprive  itself  of  all 
power  or  control  over  the  matter.  My  conclusion 
therefore  is  that  the  city  acted  beyond  the  scope  of  its 
powers  in  passing  the  ordinance  of  December  2,  1864, 
if,  as  claimed  by  the  appellee,  the  gas  company,  in  its 
bill,  it  thereby  attempted  to  irrevocably  confer  upon 
the  gas  company  the  exclusive  right  for  thirty  years  to 
light  the  city,  and  use  its  streets  for  that  purpose;  and 
that  its  act  was  ultra  vires,  and  is  void,  to  the  extent 
that  it  attempts  to  confer  such  exclusive  right." 


CHAPTER  IX. 

NO    EXCLUSIVE    FRANCHISE    BY    IMPLICA- 
TION. 

Section. 

132.  Strict  construction  of  special  franchise  grants. 

133.  Contract  of  franchise  can  not  be  impaired. 

134.  Franchise  not  exclusive  subject  to  competition. 

135.  Power  of  competition  to  destroy  franchise  rights. 

136.  Municipality  not  excluded  unless  franchise  exclusive. 

137.  Street  railway  limited  to  streets  actually  occupied. 

138.  No  sale  of  franchise  to  highest  bidder  which  defeats  compe- 

tition. 

139.  Strict  construction  as  to  subject-matter  of  franchise. 

140.  Rigid  enforcement  of  conditions  of  grant. 

141.  Rights  of  street  railway  exclusive  where  installed. 

142.  Franchise  grants  subject  to  those  already  issued. 

143.  Franchise  not  exclusive  excludes  all  without  franchise. 

§  132.  Strict  construction  of  special  franchise 
grants. — Unless  the  franchise  rights  which  are  granted 
to  a  municipal  public  utility  are  expressly  made  ex- 
clusive, the  courts  will  refuse  to  find  such  rights  to  be 
exclusive  by  implication.  This  policy  of  the  strict 
construction  of  such  special  franchise  privileges  granted 
by  municipalities,  which  is  of  universal  application,  is 
strictly  adhered  to  in  defining  the  franchise  rights  of 
municipal  public  utilities  for  the  purpose  of  preventing 
the  public  interest  and  general  welfare  of  the  munici- 
pality and  its  inhabitants  being  ignored  in  the  interest 
of  the  municipal  public  utility  for  the  sake  of  its  pri- 
vate gain. 

§  133.     Contract  of  franchise  can  not  be  impaired. 

— Under    the     decision    of    the     Dartmouth     College 

Case,  4  Wheat.  518,  establishing  the  doctrine  that  its 

charter  was  a  contract  and  that,  when  accepted  and 

172 


173  EXCLUSIVE    FRANCHISE IMPLICATION.  §  I34 

acted  upon,  the  franchise  rights  creating  it  a  body- 
corporate  became  vested,  the  courts  have  consistently 
protected  these  corporate  rights  and  the  special  fran- 
chise rights  to  street  privileges  when  conferred  on 
municipal  public  utilities  under  proper  authority  duly 
executed  and  accepted.  The  decisions,  however,  have 
just  as  consistently  adhered  to  the  principle  of  their 
strict  construction  and  have  refused  to  find  the  fran- 
chise to  be  exclusive  unless  expressly  made  so  by  the 
municipality  acting  with  the  necessary  power. 

§  134.  Franchise  not  exclusive  subject  to  compe- 
tition.— In  following  the  decision  of  the  Dartmouth 
College  Case  to  the  effect  that,  in  the  absence  of  the 
right  reserved,  the  charter  when  granted,  accepted 
and  acted  upon  can  not  be  repealed  or  materially  al- 
tered, the  courts  have  universally  held  that  it  is  not 
a  necessary  corollary  to  this  that  a  special  franchise 
to  use  the  streets  may  not  be  granted  to  others 
although  its  exercise  impairs  the  value  of  the  former 
grant  by  creating  competition;  provided,  of  course, 
that  the  first  franchise  granted  was  not  in  terms  and 
on  proper  authority  made  exclusive.  The  courts  have 
in  all  cases  clearly  made  the  distinction  between  im- 
pairing charter  contract  rights  directly  as  was  at- 
tempted in  the  Dartmouth  College  Case  and  creating 
competition  by  granting  similar  special  franchise 
privileges  to  others,  although  the  effect  of  doing  so 
necessarily  impairs  the  value  of  the  grant  first  made. 
This  well  defined  legal  distinction  necessarily  retains 
control  of  the  use  of  the  streets  in  the  state  or  the 
municipality,  whose  agent  it  is;  and  gives  force  and 
effect  to  the  exercise  of  the  necessary  police  regula- 
tions and  to  the  rule  that  a  legislative  or  govern- 
mental power  can  not  be  surrendered  or  bartered 
away  even  by  express  contract. 


§  135  PUBLIC  UTILITIES.  1 74 

§  135.  Power  of  competition  to  destroy  franchise 
rights. — This  principle  involves  an  application  of  one 
of  the  earliest  rules  of  our  jurisprudence  prohibiting 
the  creation  of  monopolies  and  has  been  fully  and 
generally  recognized  as  of  universal  application  to  the 
field  of  municipal  public  utilities  since  its  definition 
in  the  decision  of  the  famous  leading  case  of  Charles 
River  Bridge  v.  Warren  Bridge,  ii  Pet.  548,  where 
the  court  held  that  a  grant,  even  by  the  state  legis- 
lature, of  the  right  to  maintain  and  operate  a  bridge 
across  the  Charles  river  was  not  exclusive  because 
not  made  so  expressly,  but  that  the  state  thereafter 
had  the  power  to  grant  a  similar  right  to  another 
company  permitting  it  to  erect  another  bridge  over  the 
Charles  river  near-by  the  one  first  erected,  and  on 
condition  that  the  use  of  the  bridge  to  be  erected 
would  become  free  from  tolls  within  a  few  years  after 
its  completion  and  belong  to  the  state;  although  this 
in  effect  destroyed  the  right  of  the  Charles  river 
bridge  to  take  tolls  by  diverting  traffic  to  the  Warren 
bridge  when  it  became  the  property  of  the  state  free 
of  tolls. 

This  decision  in  effect  holds  that  while  competition 
might  impair  the  value  of  franchise  rights  already 
granted,  this  did  not  constitute  such  an  invasion  or 
impairment  of  franchise  rights  as  come  within  the 
meaning  and  under  the  protection  of  the  constitution. 
There  is  nothing  in  the  rights  granted  in  the  first 
franchise  which  insures  the  grantee  against  possible 
competition  in  the  future  by  another  company  to  which 
similar  rights  might  be  granted  by  the  municipality, 
because  the  state  and  its  agent  can  not  be  so  limited 
in  their  power  to  grant  special  franchise  privileges  by 
implication;  but  only  within  constitutional  limitations 
and  by  express  agreement,  although  in  effect  the  ma- 
terial consequences  may  entail  serious  loss  and  even 


175  EXCLUSIVE    FRANCHISE IMPLICATION.  §  1 36 

absolute  ruin  upon  existing  corporations  as  the  result 
of  competition  coming  from  the  granting  of  similar 
rights  to  other  parties.  These  hazards  are  necessarily 
assumed  by  the  grantees  of  such  charter  rights  unless 
they  are  expressly  guarded  against  in  the  grant. 

§  136.  Municipality  not  excluded  unless  franchise 
exclusive. — The  right  to  exclude  competition  which 
belongs  to  the  grantee  of  an  exclusive  franchise  is  not 
generally  regarded  as  beneficial  to  the  municipality 
or  its  inhabitants,  for  as  it  defeats  competition  and 
destroys  the  control  secured  thereby,  it  is  naturally 
regarded  as  inimical  to  the  public  good  and  the  gen- 
eral welfare  and  would  seem  to  redound  to  the  benefit 
and  advantage  of  the  municipal  public  utility.  Since 
this  right  to  exclude  competition  therefore  operates  for 
the  benefit  of  the  municipal  public  utility,  the  fran- 
chise will  not  be  held  to  be  exclusive  if  there  is  an- 
other equally  reasonable  construction  possible;  for  the 
special  franchise  rights  granted  which  provide  for  the 
furnishing  to  the  municipality  and  its  inhabitants  of 
the  conveniences  of  public  utilities  is  mutually  for 
their  benefit  and  that  of  the  company  providing  the 
utility,  and  is  employed  as  the  means  of  securing 
proper  public  utility  service.  Nor  will  the  grant  of  a 
franchise  by  the  municipal  corporation  in  itself,  unless 
it  so  stipulates,  exclude  the  municipality  from  fur- 
nishing municipal  public  utility  service  any  more  than 
it  will  restrict  the  municipal  corporation  from  granting 
similar  franchise  rights  to  other  corporations. 

The  grantee  of  such  a  franchise,  which  is  not 
clearly  exclusive,  acquires  no  right  by  virtue  of  the 
grant  to  object  to  the  issue  of  similar  franchises  to 
others  or  to  the  exercise  of  the  power  vested  in  the 
municipal  corporation  itself  to  own  and  operate  its 
own    public    utility    systems.      As    before    stated,    no 


§  137  PUBLIC  UTILITIES.  1 76 

power  to  grant  exclusive  franchises  will  be  found  in 
municipalities  by  implication;  so  for  the  same  rea- 
sons no  franchise  granted  by  a  municipal  corporation 
will  be  held  to  be  exclusive  by  implication/ 

§  137.  Street  railway  limited  to  streets  actually 
occupied. — The  case  of  Citizens'  St.  R.  Co.  v.  Jones, 
34  Fed.  579,  145  U.  S.  633,  36  L.  ed.  855,  decided  in 
1888,  enunciates  this  principle  and  indicates  that  the 
courts  impose  the  further  practical  limitation  denying 

1  ALABAMA.— Montgomery  Light  &  W.  P.  Co.  v.  Citizens'  Light, 
Heat  &  P.  Co.,  142  Ala.  462,  38  So.  1026. 

CALIFORNIA.— Pereria  v.  Wallace,  129  Cal.  397,  62  Pac.  61. 

CONNECTICUT.— New  Hartford  Water  Co.  v.  Village  Water 
Co.  (Conn.),  87  Atl.  358. 

FEDERAL.— Citizens'  St.  R.  Co.  v.  Jones,  34  Fed.  579,  145  U. 
S.  633,  36  L.  ed.  855;  Madera  Waterworks  v.  Madera,  185  Fed.  281; 
Omaha  Electric  Light  &  Power  Co.  v.  Omaha,  172  Fed.  494;  Glen- 
wood  Springs  v.  Glenwood  Light  &  W.  Co.,  202  Fed.  678;  Washing- 
ton-Oregon Corp.  V.  Chehalis,  202  Fed.  591. 

FLORIDA.— Capital  City  Light  &  Fuel  Co.  v.  Tallahassee,  42 
Fla.  462,  28  So.  810,  186  U.  S.  401,  46  L.  ed.  1219. 

ILLINOIS.— Chicago  Tel.  Co.  v.  Northwestern  Tel.  Co.,  199  III. 
324,  65  N.  E.  329;  Peoria  R.  Co.  v.  Peoria  R.  Terminal  Co.,  252  111. 
73,  96  N.  E.  689. 

INDIANA.— Crowder  v.  Sullivan,  128  Ind.  486,  28  N.  E.  94,  13  L. 
R.  A.  647. 

KANSAS.— Coffeyville  Min.  &  Gas  Co.  v.  Citizens'  Nat.  Gas  & 
Min.  Co.,  55  Kans.  173,  40  Pac.  326. 

LOUISIANA.— Hourna  Lighting,  &c.,  Co.  v.  Hourna,  127  La.  726, 
63  So.  970. 

NEBRASKA.— Bell  v.  David  City  (Neb.),  142  N.  W.  523;  Min- 
den-Edison  Light  &  Power  Co.  v.  Minden  (Neb.),  142  N.  W.  673. 

NEW  JERSEY.— Millville  Gas  Light  Co.  v.  Vineland  Light  & 
Power  Co.,  72  N.  J.  Eq.  305,  65  Atl.  504. 

NEW  YORK.— City  of  Brooklyn,  In  re,  143  N.  Y.  596,  38  N.  E. 
983,  26  L.  R.  A.  270. 

OKLAHOMA.— Bartlesville  Electric  L.  &  P.  Co.  v.  Bartlesville 
I.  R.  Co.,  26  Okla.  456,  109  Pac.  228;  Sapulpa  v.  Sapulpa  Oil  &  Gas 
Co.,  22  Okla.  347,  97  Pac.  1007;  Tulsa  St.  R.  Co.  v.  Oklahoma  Union 
Traction  Co.,  27  Okla.  339,  113  Pac.  180. 

UNITED  STATES.— Detroit  Citizens'  St.  R.  Co.  v.  Detroit  R., 
171  U.  S,  48,  43  L.  ed.  67;  Madera  Waterworks  v.  Madera,  228 
U.  S.  454. 


177  EXCLUSIVE    FRANCHISE — IMPLICATION.  §  I38 

the  municipal  public  utility  providing  transportation 
the  right  to  use  all  the  streets  of  the  municipality  for 
street  railway  purposes  by  limiting  it  to  the  use  of 
those  streets  along  which  it  has  constructed  its  rail- 
way. In  sustaining  the  right  of  a  competing  trans- 
portation system  to  operate  along  streets  not  occupied 
by  the  grantee  of  the  first  franchise,  under  which  it 
claimed  exclusive  right  to  the  use  of  all  the  streets 
of  the  municipality  for  street  railway  purposes,  the 
court  said:  "The  power  granted  to  the  mayor  and 
council  to  contract  on  this  subject,  is,  as  the  act  in 
terms  declares,  'for  the  purpose  of  providing  .  .  . 
street  railroads,'  and  it  is  for  that  purpose  they  are 
authorized  to  grant  'for  the  time  which  may  be  agreed 
upon  the  exclusive  privilege  of  using  the  streets  and 
alleys  of  such  city  for  such  purpose.  .  .  .'  Section 
755,  Mansf.  Dig.  It  is  the  actual  use  of  the  street  for 
the  purpose  that  confers  the  exclusive  privilege. 
.  .  .  The  power  and  duty  of  determining  when  and 
on  what  streets  the  public  convenience  requires  street 
railroads  is  devolved  by  law  on  the  city  council,  and 
that  body  can  not  refuse  to  discharge  this  function,  or 
devolve  it  on  a  street  car  company,  whose  action 
would  be  controlled  by  its  own,  rather  than  the  public 
interests.  But  this  is  exactly  what  it  is  said  was  done. 
Whether  any  more  than  a  few  hundred  feet  of  railroad, 
on  one  street,  should  be  constructed  in  a  populous  and 
growing  city  for  a  period  of  ninety  years,  is  left  to  the 
discretion  of  the  street  car  company;  or,  as  it  is  ex- 
pressed in  the  contract,  'as  the  parties  of  the  second 
part  think  public  necessities  require.'  " 

§  138.  No  sale  of  franchise  to  highest  bidder 
which  defeats  competition. — The  reason  for  this  rule 
is  well  expressed  in  the  case  of  Pereria  v.  Wallace,  129 
Cal.  397,  62  Pac.  61,  decided  in  1900,  where  the  court 

12— Pub.Ut. 


§139  PUBLIC  UTILITIES.  1 78 

denied  the  right  of  the  municipality  to  sell  the  fran- 
chise to  the  highest  bidder  for  the  reason  that  this 
would  exclude  other  public  utility  concerns  and  destroy 
competition,  which  was  contrary  to  the  provisions  of 
the  state  constitution,  for  as  the  court  said:  "The 
constitution  intended  that  there  should  be  no  restric- 
tion upon  competition  in  supplying  these  prime  neces- 
sities, as  would  necessarily  result  if  the  privilege  could 
only  be  granted  to  the  highest  bidder,  for  such  bidder 
would  necessarily  secure  an  exclusive  right  to  the 
exercise  of  the  franchise;  the  only  condition  imposed 
by  the  constitution  being  the  right  of  the  municipality 
*to  regulate  the  charges  thereof.'  .  .  .  We  think 
it  clear,  however,  that  under  said  provision  of  the 
constitution  the  duty  of  the  trustees  to  grant  the 
franchise  demanded  by  the  plaintiff,  subject  only  to 
the  regulations  and  conditions  therein  imposed,  is  im- 
perative, and  that  a  prior  grant  of  a  similar  franchise 
or  privilege  to  other  persons  or  corporations  is  no 
reason  why  the  plaintiff's  demand  should  not  be 
granted.  It  is  true,  it  does  not  expressly  appear  that 
the  trustees  had  made  any  'general  regulations'  for 
'damages  and  indemnity  for  damages'  for  the  privilege 
of  using  the  public  streets  for  the  purposes  specified; 
but  it  does  appear  that  a  privilege  identical  with  that 
sought  by  the  plaintiff  was  granted  to  the  development 
company,  and  the  writ  of  mandate  granted  to  the 
plaintiff  is  that  the  same  privilege  be  granted  to  him 
as  was  granted  to  the  development  company,  and  this 
necessarily  includes  the  regulations  imposed  upon  that 
company." 

§  139.  Strict  construction  as  to  subject-matter  of 
franchise. — The  case  of  Omaha  Electric  Light  & 
Power  Co.  v.  Omaha,  172  Fed.  494,  decided  in  1909, 
in   strictly  limiting  the   franchise  rights,   not  in  terms 


179  EXCLUSIVE    FRANCHISE — IMPLICATION.  §  I40 

exclusive,  granted  a  public  utility  to  provide  "general 
electric  light  business"  held  that  such  a  franchise  did 
not  permit  the  company  to  transmit  electrical  current 
for  any  purpose  other  than  lighting,  the  court  saying: 
"I  can  not  think  that,  in  granting  in  1884  the  right 
to  transmit  electricity  through  the  streets  and  alleys 
of  the  city  for  general  electric  lighting  purposes,  it  was 
in  the  mind  of  the  city  council,  or  any  of  the  parties, 
or  that  they  for  a  moment  contemplated  or  intended, 
that  the  ordinance  in  question  granted  the  right  to 
transmit  an  electric  current  for  all  purposes  and  uses 
to  which  the  inventive  mind  might  in  the  future  apply 
it,  even  though  such  new  uses  might  be  equally  bene- 
ficial to  the  public.  Had  such  been  the  intention,  the 
word  'light'  would  have  been  omitted.  The  words  *a 
general  electric  light  business,'  as  used  in  the  ordi- 
nance, show  clearly  an  intention  to  limit  the  use  to 
which  the  electric  current  was  to  be  applied." 

§  140.  Rigid  enforcement  of  conditions  of  grant. 
— The  rule  of  the  strict  construction  of  these  fran- 
chise grants  is  further  enforced  by  requiring  the  com- 
plete performance  of  all  conditions  upon  which  the 
grant  may  be  made  before  its  privileges  may  be  en- 
joyed and  until  conditions  so  imposed  are  performed 
and  until  the  corporation  begins  to  furnish  the  services 
which  constitute  the  consideration  for  the  grant,  the 
courts  hold  that  there  are  no  vested  rights  to  be  pro- 
tected within  the  meaning  of  the  constitution.  This 
rule  of  limitation  is  imposed  for  the  further  practical 
reason  of  preventing  speculation  in  such  franchise 
rights  so  that  as  is  stated  in  the  decision  in  the  case 
of  Capital  City  Light  &  Fuel  Co.  v.  Tallahassee,  42 
Fla.  462,  28  So.  810,  186  U.  S.  401,  46  L.  ed.  1219, 
decided  in  1900:  "All  such  grants  are  strictly  con- 
strued against  the  grantee,  and  nothing  passes  thereby 


§  141  PUBLIC  UTILITIES.  l8o 

but  such  as  is  clearly  intended.  Saginaw  Gaslight 
Co.  V.  Saginaw  (C.  C.)  28  Fed.  529;  Florida,  A.  &  G. 
C.  R.  Co.  V.  Pensacola  &  G.  R.  Co.,  10  Fla.  145.  Un- 
der the  express  language  of  this  statute,  the  exclusive 
privilege  did  not  attach  until  the  corporation  was  not 
only  organized,  but  put  into  successful  operation,  and 
the  privileges  were  to  attach  for  twenty  years  from  the 
time  the  corporation  commenced  to  carry  out  in  good 
faith  the  terms  of  its  articles  of  incorporation.  The 
condition  upon  which  attached  the  exclusive  privilege, 
so  far  as  the  electric  light  plant  was  concerned,  has 
never  been  performed.  ...  In  the  next  place, 
even  if  an  exclusive  privilege  of  this  nature,  tending 
to  establish  a  monopoly,  was  granted  without  such 
express  condition  precedent  as  we  find  in  our  statute, 
such  grant  does  not  become  a  contract  or  a  vested 
right,  so  as  to  be  protected  by  the  Constitution  of  the 
state  or  the  United  States,  until  the  company  has,  to 
say  the  least,  begun  to  do  the  thing  required  by  the 
charter  as  the  consideration  for  the  grant  of  such 
privilege.  Pearsall  v.  Railway  Co.,  161  U.  S.  646; 
Louisville  &  N.  R.  Co.  v.  Kentucky,  161  U.  S.  dyj. 
See,  also,  Chincleclamouche  Lumber  &  Boom  Co.  v. 
Com.,  100  Pa.  St.  438.  It  would  be  going  too  far  to 
hold  that  the  clauses  of  those  constitutions  protecting 
the  obligations  of  contracts  from  impairment  would 
enable  one  legislature  to  tie  the  hands  of  another  in 
matters  of  public  convenience  and  interest,  such  as 
lighting  cities,  by  granting  charters  containing  ex- 
clusive privileges  to  perform  these  public  benefits 
which  are  held  for  speculative  or  other  purposes,  with- 
out attempting  to  execute  the  powers  granted.  Gon- 
zales V.  Sullivan,  16  Fla.  791,  text  820;  Elliott,  Roads 
&  S.,  p.  569  et  seq." 

§  141.     Rights    of   street   railway   exclusive    where 
installed. — While  the  granting  of  a  franchise  to  own 


l8l  EXCLUSIVE    FRANCHISE — IMPLICATION.  §  I42 

and  operate  a  street  railway  company  is  naturally  and 
necessarily  exclusive  as  to  the  privilege  to  use  the 
streets  in  which  tracks  are  actually  laid  and  transpor- 
tation furnished  which  constitutes  the  consideration 
for  the  grant  and  makes  a  binding  contract,  the  city 
may  thereafter  grant  similar  rights  for  the  use  of 
other  streets  to  a  different  company,  for  as  is  stated 
in  the  case  of  Peoria  R.  Co.  v.  Peoria  R.  Terminal  Co., 
252  111.  73,  96  N.  E.  689,  decided  in  1911 :  "A  city 
may  grant  the  right  to  a  second  company  to  construct 
and  operate  a  street  railway  system  over  and  upon 
its  streets,  provided  the  same  can  be  done  without 
necessarily  appropriating  that  portion  of  the  streets 
which  has  been  granted  to  the  first  company,  and 
which  is  being  used  by  it  in  the  operation  of  its  rail- 
way system.  While  a  street  railway  company  can- 
not, by  ordinance,  be  given  the  exclusive  right  to 
the  use  of  the  streets  of  the  municipality,  when  it  is 
granted  the  right  to  construct  and  maintain  a  street 
railway  system  for  a  definite  period,  it  is  thereby 
given  the  exclusive  right  to  that  portion  of  the 
streets  granted  to  it  for  use  for  street  railway  pur- 
poses during  the  time  of  the  grant,  and  during  that 
time  has  the  right  to  exclude  other  street  railway 
companies  from  the  use  of  its  tracks  and  the  space 
occupied  by  its  cars.  Barsaloux  v.  City  of  Chicago, 
245  111.  598,  92  N.  E.  525;  Hamilton  Traction  Co.  v. 
Hamilton  Electric  Transit  Co.,  69  Ohio  St.  402,  69 
N.  E.  991 ;  City  Railway  Co.  v.  Citizens'  Street  Rail- 
road Co.,  166  U.  S.  557." 

§  142.  Franchise  grants  subject  to  those  already 
issued. — Unless  the  particular  municipal  public  utility 
secures  an  exclusive  franchise  from  the  city  acting 
with  proper  authority,  it  is  not  in  position  to  prevent 


§  142  PUBLIC  UTILITIES.  1 82 

a  competitor,  who  has  secured  similar  rights,  from 
installing  and  operating  another  public  utility  plant; 
and  although  the  city  has  attempted  to  grant  the  ex- 
clusive right  to  a  single  municipal  public  utility  it  is 
not  thereby  prevented  from  granting  a  similar  fran- 
chise to  another  where  it  had  no  power  to  make  the 
franchise  exclusive.  The  enjoyment  of  the  rights 
granted  in  the  second  franchise,  however,  is  subject 
to  such  use  as  is  not  inconsistent  with  the  exercise  of 
the  rights  granted  in  the  first  franchise  and  avoids 
actual  physical  interference  by  the  system  of  wires, 
pipe  lines,  tracks  and  the  like  of  the  grantee  of  the 
second  franchise  with  the  rights  granted  by  the  for- 
mer franchise,  for  as  is  stated  in  the  case  of  Chicago 
Tel.  Co.  V.  Northwestern  Tel.  Co.,  199  111.  324,  65 
N.  E.  329,  decided  in  1902:  "Wherever  telephone 
companies  occupy  the  public  streets  with  their  poles 
and  wires,  there  will,  as  a  matter  of  course,  be  some 
interference  between  them.  The  thing  to  be  guarded 
against  is  such  an  interference  as  will  prevent  the 
practical  operation  of  any  one  telephone  system.  In 
other  words,  it  was  and  is  the  duty  of  appellee  so  to 
construct  and  use  its  telephone  system  as  not  unneces- 
sarily and  unreasonably  to  interfere  with  the  operation 
by  appellant  of  its  system.  To  grant  any  one  com- 
pany the  exclusive  right  to  use  the  streets  would  be 
to  establish  a  monopoly." 

The  limitation  which  is  placed  on  the  exercise  of 
the  later  franchise  grant  is  well  expressed  in  the  case 
of  Montgomery  Light  &  W.  P.  Co.  v.  Citizens'  Light, 
Heat  &  P.  Co.,  142  Ala.  462,  38  So.  1026,  decided  in 
1905,  where  the  court  says :  "So  far  as  the  public 
streets  of  a  city  are  concerned,  neither  party  can 
assert  any  exclusive  rights  thereon.  Under  the  Con- 
stitution of  Alabama,  it  is  not  within  the  power  of  a 
municipal    corporation    to    grant    any    exclusive    privi- 


183  EXCLUSIVE    FRANCHISE — IMPLICATION  §  I43 

lege  in  its  streets  to  any  corporation,  so  as  to  de- 
prive itself  of  the  right  to  revoke  the  same  and  grant 
like  privileges  to  another.  Const,  section  22;  Bir- 
mingham &  P.  M.  R.  Co.  V.  Birmingham  S.  Ry.  Co., 
79  Ala.  465,  58  Am.  Rep.  615.  Though,  unquestionably, 
the  municipality,  after  granting  to  a  corporation  the 
right  to  use  its  streets  for  a  public  utility,  has  the 
right,  in  granting  like  privileges  to  another,  to  pro- 
vide such  restrictions  and  regulations  as  are  necessary 
to  prevent  injury  to  the  property  of  the  first  occu- 
pant, and  to  prevent  an  interference  with  its  discharge 
of  the  duties  assumed  to  the  public;  and,  where  such 
interference  involves  danger  to  the  public,  the  courts 
will  prevent  it,  even  without  any  ordinance.  Consoli- 
dated Electric  Light  Co.  v.  People's  Electric  Light 
&  Gas  Co.,  94  Ala.  372,  10  So.  440.  In  the  present 
case  it  is  shown  that  the  defendant  company  was 
granted  by  the  city  of  Montgomery  like  rights  and 
franchises  on  the  streets  of  the  city  as  had  been 
granted  to  complainant,  with  a  special  proviso  'that 
the  poles  and  wires  of  said  Citizens'  Light,  Heat  & 
Power  Company  should  not  be  erected  and  strung 
so  as  to  interfere  with  the  poles  and  wires  of  the  com- 
plainant   company.'  " 

§  143.  Franchise  not  exclusive  excludes  all  without 
franchise. — Where  the  municipal  public  utility  does  not 
have  an  exclusive  franchise  to  the  use  of  the  streets, 
it  may  prevent  the  installation,  maintenance  and 
operation  of  a  similar  public  utility  plant  by  another 
company  who  has  not  secured  a  franchise  on  the 
theory  that  rights  granted  in  a  franchise  although 
not  in  terms  exclusive  are  actually  so  as  to  all  others 
not  having  similar  franchises,  for  as  the  court  in 
Bartlesville  Electric  L.  &  P.  Co.  v.  Bartlesville  I.  R. 
Co..  26  Okla.  456,  109  Pac.  228,  decided  in  1910,  says: 


§143  PUBLIC  UTILITIES.  1 84 

"Plaintiff  does  not  insist  in  this  court  that  the  exclu- 
sive provision  of  its  franchise  is  valid,  but  it  seeks  to 
maintain  its  action  upon  the  theory  that,  notwith- 
standing it  has  no  exclusive  franchise  and  the  city- 
has  authority  to  grant  a  similar  franchise  to  other 
persons,  the  use  of  the  streets,  alleys,  and  public 
places  of  the  city  by  defendant  without  legislative 
authority  from  the  municipal  corporation  is  such  an 
infringement  on  plaintiff's  rights  that  it  is  entitled 
to  injunctive  relief.  ...  By  its  unlawful  acts 
defendant  can  and  will  take  from  plaintiff  a  portion  of 
its  business.  ...  Its  right  to  sell  light  and  power 
is  not  dependent  upon  any  franchise,  but  its  right  to 
use  the  streets  and  pubHc  grounds  of  the  city  for  that 
purpose  does  depend  upon  the  consent  of  the  city;  and, 
when  it  uses  the  streets  without  that  consent,  it  is  not 
only  guilty  of  maintaining  a  public  nuisance,  but  also 
inflicts  upon  plaintiff  a  special  injury  by  its  unlawful  act 
which  may  be  restrained." 

That  the  municipal  public  utility  may  protect  its 
right  to  the  exclusive  exercise  of  the  privileges  granted 
in  the  franchise  as  against  all  trespassers  or  parties 
attempting  to  exercise  similar  rights  without  a  fran- 
chise because  the  right  is  not  one  belonging  to  the 
people  generally  but  results  from  the  grant  of  special 
privileges  which  constitute  the  consideration  for  the 
furnishing  of  the  particular  convenience  or  pubHc 
utility  is  well  expressed  in  the  case  of  Tulsa  St.  R. 
Co.  V.  Oklahoma  Union  Traction  Co.,  27  Okla.  339, 
113  Pac.  180,  decided  in  1910,  in  the  following  lan- 
guage :  "If  the  grantee  of  a  franchise  has  a  privilege 
under  the  franchise  which  is  exclusive  as  to  those  who 
have  not  a  similar  privilege,  and  such  privilege  is 
private  property,  what  reason  is  there  for  denying  to 
the  owner  of  such  privilege  the  same  remedy  to  pro- 
tect that  property  when  special  injury  is  inflicted  upon 


185  EXCLUSIVE   FRANCHISE IMPLICATION.  §  I43 

it  by  one  maintaining  a  public  nuisance  that  is  given 
to  other  owners  of  private  property?  If  an  abutting 
owner  is  especially  injured  by  a  railway  company  who 
occupies  the  streets  without  legislative  authority,  it 
would  not  be  questioned  that  such  abutting  owner 
would  have  his  remedy  to  enjoin  the  nuisance  because 
of  the  special  injury  he  suffers.  Nor  could  the  defend- 
ant in  such  an  action  oust  the  court  of  jurisdiction 
by  pleading  that  it  acted  under  a  franchise,  when  in 
fact  it  did  not,  or  by  pleading  that  it  acted  under  a 
franchise  which  was  granted  by  a  body  without  au- 
thority. .  .  .  So  in  the  case  at  bar  we  say  it  is 
plain  that  the  council  in  granting  understood  that  the 
use  of  streets  thereafter  to  be  added  to  the  city  by 
extending  the  city  limits  was  granted  by  the  general 
terms  of  the  ordinance,  and,  to  save  extensions  of 
certain  streets  from  its  operation,  it  excepted  them 
from  the  general  terms,  just  as  it  excepted  specifically 
named  streets." 


CHAPTER  X. 

CONTRACTS  OF  MUNICIPAL  CORPORATIONS 
FOR  PUBLIC  UTILITY  SERVICE. 

Section, 

144.  Power  of  municipal  authorities  to  contract. 

145.  Contract  for  service  not  exclusive  by  implication. 

146.  Contract  not  exclusive  of  competition  or  municipality. 

147.  Wide  discretion  of  municipal  authorities. 

148.  Exclusive  contract  for  reasonable  period. 

349.  Contracts   with    municipal    and    private   parties    distinguished. 

150.  Power  of  municipality  determined  by  necessity. 

151.  Exclusive  contract  formerly  denied  validity. 

152.  Right  to  regulate  rates  to  be  conserved. 

153.  Contract  executed  by  municipality  as  business  concern. 

154.  Contract  for  excessive  period  void. 

155.  Contract  with  duration  not  fixed  is  optional,  not  perpetual. 

156.  Municipal  contract  not  exclusive  unless  expressly  made  so. 

157.  Impairment  of  franchise  rights  by  competition  not  prohibited. 

158.  Contract  not   exclusive  to   preserve   competition. 

159.  Contract  for  division  of  territory  among  competitors  .void. 

160.  Exclusiveness  of  franchise  may  be  waived. 

161.  Contract  limiting  service  to  exclude  competition  void. 

162.  Contract  for  unnecessary  service  unreasonable  and  invalid. 

163.  Perpetual  contract  void. 

164.  Contract   tending   to   exclude   municipality    strictly   construed. 

165.  Municipality  may  exclude  itself  expressly. 

166.  Municipality  excluded  by  exclusive  contract. 

§  144.  Power  of  municipal  authorities  to  con- 
tract.— The  municipal  corporation  acting  under  stat- 
utory authority  may  in  contracting  for  the  service  of 
municipal  pubHc  utilities  for  itself  and  its  inhabitants 
exercise  a  wide  discretion  without  objection  or  inter- 
ference on  the  part  of  the  court,  unless  fraud  is  found 
or  the  discretion  is  grossly  abused  by  the  terms  of  the 
contract  being  clearly  unreasonable  and  inequitable. 
186 


187  CONTRACTS    OF    MUNICIPALITIES.  §  I45 

While  municipal  authorities  are  given  power  by  impli- 
cation to  contract  for  the  necessary  service  of  public 
utilities  •  beyond  the  term  of  their  office  and  for  a 
reasonable  time  under  the  circumstances  of  the  par- 
ticular case,  because  it  is  practically  impossible  to  get 
such  service  to  any  advantage  and  at  reasonable  rates 
for  very  short  periods,  what  time  is  reasonable  for  such 
contracts  is  a  question  of  fact  to  be  determined  in 
each  particular  case.  Naturally  no  definite  period  of 
time  can  be  fixed  upon  as  a  reasonable  one  for  all 
cases.  Where  the  maximum  period  provided  in  the 
statute  is  exceeded,  or  where  the  term  fixed  in  the 
contract  extends  over  so  long  a  period  of  time  as  to 
result  in  the  granting  of  an  exclusive  privilege  to  the 
extent  of  creating  a  monopoly  and  unduly  interfering 
with  the  exercise  of  the  legislative  powers  of  municipal 
authorities,  the  contract  will  be  held  void  and  set 
aside  as  unreasonable  and  beyond  the  powers  of  the 
municipality  to  make. 

§  145.  Contract  for  service  not  exclusive  by  im- 
plication.— The  contract  for  such  service  will  not  by 
implication  be  construed  as  exclusive  for  the  same 
reason  that  the  power  of  the  municipality  in  the  first 
instance  to  grant  a  franchise,  or  the  franchise  when 
granted,  will  not  be  regarded  as  exclusive  by  implica- 
tion. Nor  will  the  making  of  such  a  contract  by  the 
municipal  corporation  in  itself  exclude  the  municipality 
from  entering  the  field  and  maintaining  municipal 
public  utilities  any  more  than  the  granting  of  a  fran- 
chise or  the  making  of  a  contract  restricts  the  munici- 
pality from  making  additional  contracts  with  other 
corporations  or  granting  similar  franchise  rights  to 
them.  The  contract  for  public  utility  service  is,  of 
course,  protected  the  same  as  any  other  contract,  but 
the  fact  that  the  municipality  has  made  a  contract  for 


§  146  PUBLIC  UTILITIES.  188 

a  certain  amount  of  service  does  not  prevent  it  from 
entering  into  another  agreement  with  a  different  com- 
pany for  additional  or  other  service;  although  practi- 
cally this  of  necessity  has  the  effect  of  interfering  with 
the  business  interests  of  the  party  to  the  first  contract 
because  in  permitting  and  encouraging  competitive 
conditions  it  diverts  some  of  the  business  to  the  com- 
petitor. 

§  146.  Contract  not  exclusive  of  competition  or 
municipality. — This  loss  of  business,  however,  is  not 
protected  by  the  constitutional  provision  prohibiting 
the  impairment  of  contracts  any  more  than  the  grant- 
ing of  the  franchise  itself,  which,  as  we  have  seen,  can 
not  be  found  to  be  exclusive  unless  made  so  expressly. 
And  while  the  municipal  public  utility  on  securing  a 
contract  with  the  municipaHty  for  a  certain  amount 
of  its  service  naturally  anticipates  that  it  will  be  per- 
mitted to  render  all  the  service  that  the  municipality 
requires,  the  agreement  does  not  prevent  the  city  from 
contracting  for  additional  service  from  other  public 
utilities  which  may  be  installed  later,  thus  securing  to 
the  city  and  its  inhabitants  the  advantages  of  competi- 
tion; nor  does  it  restrain  the  city  itself  from  owning 
and  operating  a  competing  public  utility  plant  unless 
the  contract  or  the  franchise  in  the  first  instance  was 
expressly  made  exclusive. 

§  147.     Wide  discretion  of  municipal  authorities. — 

The  determination  of  the  question  as  to  the  nature  and 
extent  of  the  power  and  the  discretion  vested  in  munic- 
ipalities permitting  them  to  make  contracts  for  the 
service  of  public  utilities  necessarily  depends  upon  the 
legislative  authority  and  so  many  varying  circum- 
stances and  conditions  of  the  municipality  in  question 
as  to   size,  situation,  cost  of  supply  and  future  pros- 


189  CONTRACTS    OF    MUNICIPALITIES.  §  I49 

pects  that  our  courts  will  not  interfere  and  set  aside 
such  contracts  when  made  by  municipalities  in  the 
exercise  of  their  discretion,  except  in  extreme  cases 
of  its  abuse.  As  the  circumstances  attending  the 
different  cases  are  necessarily  so  varied  and  as  the 
decision  of  the  question  is  peculiar  to  the  facts  of 
each  case,  the  following  extracts  from  some  of  the 
leading  cases  are  furnished  to  define  and  illustrate  the 
application  of  this  principle. 

§  148.  Exclusive  contract  for  reasonable  period. 
— While  from  a  few  of  the  authorities  it  appears  that 
some  of  our  courts  have  held  that  the  municipal  cor- 
poration can  not  make  an  exclusive  contract  for  public 
utility  service  even  for  a  fixed  period  of  years,  which 
but  for  the  exclusive  feature  would  be  generally  re- 
garded as  a  reasonable  period  to  bind  the  municipality, 
the  greater  weight  of  authority,  and  it  would  seem  the 
better  reason,  permits  the  municipality  in  the  exercise 
of  its  discretion  to  make  such  terms  for  securing  the 
services  of  municipal  public  utilities  as  seem  wise  and 
necessary  at  the  time  the  contract  is  entered  into. 
Necessity  is  regarded  as  the  proper  measure  of  the 
municipality's  power  and  it  is  permitted  to  make  such 
stipulations  as  to  the  duration  of  the  contract  and  its 
exclusiveness  as  the  municipality  finds  necessary  or 
expedient  to  secure  satisfactory  service  at  reasonable 
rates;  and  to  secure  such  service  the  municipality  may, 
if  necessary,  agree  that  all  such  service  shall  be  ren- 
dered only  by  the  municipal  public  utility  with  which 
it  is  contracting,  even  to  the  exclusion  of  the  munici- 
pality itself  provided  the  duration  of  such  a  contract 
is  not  unreasonable. 

§  149.  Contracts  with  municipal  and  private  parties 
distinguished. — It  is  of  course  obvious  that  the  enjoy- 


§  149  PUBLIC  UTILITIES.  I9O 

merit  of  an  exclusive  franchise  or  contract  for  the 
supply  of  public  utiHty  service  by  the  municipaHty 
itself  is  always  to  be  distinguished  from  the  case  where 
such  a  power  is  reposed  in  a  private  concern,  for  in  the 
former  case  the  franchise  rights  are  exercised  by  the 
people  and  for  their  best  interests  and  not  for  private 
gain  or  primarily  for  profit.  The  control  of  the  service 
in  the  former  case  remains  in  the  municipality  which 
renders  it  to  itself  and  its  inhabitants  for  their  mutual 
benefit  and  in  the  interest  of  the  general  welfare. 
Where  such  exclusive  rights,  however,  are  placed  in 
the  hands  of  private  capital,  whose  chief  purpose  and 
ultimate  object  is  the  greatest  possible  return  on  the 
investment,  the  tendency  is  to  disregard  the  interest 
and  convenience  of  the  public  which  can  be  properly 
conserved  only  by  competition  or  public  regulation  and 
control.^ 


1  ALABAMA.— Gadsden  v.  Mitchell,  145  Ala.  137,  40  So.  557,  6  L. 
R.  A.  (N.  S.)  781. 

ARIZONA.— Phoenix  Water  Co.  v.  Phoenix,  9  Ariz.  430,  84  Pac. 
1095. 

COLORADO.— Thomas  v.  Grand  Junction,  13  Colo.  App.  80,  56 
Pac.  665. 

FEDERAL.— Cunningham  v.  Cleveland,  98  Fed.  657;  Cumberland 
Gaslight  Co.  v.  West  Virginia  &  M.  Gas  Co.,  188  Fed.  585;  Defiance 
Water  Co.  v.  Defiance,  90  Fed.  753;  Little  Falls  Electric,  &c.,  Co. 
V.  Little  Falls,  102  Fed.  663;  Meridian  v.  Farmers'  L.  &  T.  Co.,  143 
Fed.  67;  Mercantile  Trust  &  Deposit  Co.  v.  Columbus,  161  Fed.  135; 
Nelson  v.  Murfreesboro,  179  Fed.  905;  Risley  v.  Utica,  179  Fed.  875; 
Saginaw  Gas-Light  Co.  v.  Saginaw,  28  Fed.  529;  Tillamook  Water 
Co.  V.  Tillamook  City,  139  Fed.  405;  Tillamook  Water  Co.  v.  Tilla- 
mook City,  150  Fed.  117;  Water,  Light  &  Gas  Co.  v.  Hutchinson, 
144  Fed.  256,  207  U.  S.  385,  52  L.  ed.  257. 

GEORGIA. — Western  Union  Tel.  Co.  v.  American  Union  Tel.  Co., 
65  Ga.  160,  38  Am.  Rep.  781. 

IDAHO.— Jack  v.  Grangeville,  9  Idaho  291,  74  Pac.  969. 

ILLINOIS.— Chicago  Gas-Light  &  C.  Co.  v.  People's  Gas-Light  & 
C.  Co.,  121  111.  530,  13  N.  E.  169,  2  Am.  St.  124;  St.  Louis  &  C.  R.  Co. 
V.  Postal  Tel.  Co.,  173  111.  508,  51  N.  E.  382;  Western  Union  Tel.  Co. 
V.  Chicago  &  Paducah  R.  Co.,  86  111.  246,  29  Am.  Rep.  28. 


191  CONTRACTS    OF    MUNICIPALITIES.  §  I50 

§  150.  Power  of  municipality  determined  by  neces- 
sity.— The  case  of  Mercantile  Trust  &  Deposit  Co.  v. 
Columbus,   161   Fed.   135,  decided  in   1908,  furnishes  a 


INDIANA.— Gaslight  &  Coke  Co.  of  New  Albany  v.  New  Albany, 
156  Ind.  406,  59  N.  E.  176;  Vincennes  v.  Citizens'  Gas  Light  Co.,  132 
Ind.  114,  31  N.  E.  573. 

KANSAS.— Richardson  Gas  &  Oil  Co.  v.  Altoona,  79  Kans.  466, 
100  Pac.  50,  21  L.  R.  A.  (N.  S.)  214. 

KENTUCKY.— Newport  v.  Newport  Light  Co.,  84  Ky.  166,  8  Ky. 
L.  22,  21  S.  W.  645;  People's  Electric  L.  &  P.  Co.  v.  Capital  Gas  & 
Electric  L.  Co.,  116  Ky.  76,  25  Ky.  L.  327,  75  S.  W.  280. 

MARYLAND.— Westminster  Water  Co.  v.  Westminster,  98  Md. 
551,  56  Atl.  990,  64  L.  R.  A.  630,  103  Am.  St.  424. 

MASSACHUSETTS.— Revere  Water  Co.  v.  Winthrop,  192  Mass. 
455,  78  N.  E.  497,  207  U.  S.  604,  52  L.  ed.  360. 

MICHIGAN.— Gale  v.  Kalamazoo,  23  Mich.  344,  9  Am.  Rep.  80. 

MINNESOTA.— Flynn  v.  Little  Falls  Electric  &  Water  Co.,  74 
Minn.  180,  77  N.  W.  38,  78  N.  W.  106. 

MISSISSIPPI.— Light,  Heat  &  Water  Co.  v.  Jackson,  73  Miss. 
598,  19  So.  771. 

MISSOURI.— St.  Louis  v.  St.  Louis  Gaslight  Co.,  70  Mo.  69. 

NEW  YORK.— Central  New  York  Tel.  &  T.  Co.  v.  Averill,  199 
N.  Y.  128,  92  N.  E.  206,  32  L.  R.  A.  (N.  S.)  494;  City  of  BrookljTi, 
In  re,  143  N.  Y.  596,  38  N.  E.  983,  26  L.  R.  A.  270. 

OHIO.— State  ex  rel.  Atty.  Gen.  v.  Cincinnati  Gas-Light  &  Coke 
Co.,  IS  Ohio  262;  State  ex  rel.  Hamilton  Gas  &  Coke  Co.  v.  Hamilton, 
47  Ohio  St.  52,  23  N.  E.  935. 

OKLAHOMA.— Mitchell  v.  Tulsa  Water,  &c.,  Co.,  21  Okla.  243, 
95  Pac.  961. 

SOUTH  CAROLINA.— Gwynn  v.  Citizens'  Tel.  Co.,  69  S.  Car 
434,  48  S.  E.  460. 

TENNESSEE.— Memphis  Gaslight  Co.  v.  Memphis,  93  Tenn. 
612,  30  S.  W.  25. 

TEXAS.— Ennis  Waterworks  v.  Ennis,  (Tex.)  144  S.  W.  930. 

UNITED  STATES.— Bienville  Water  Supply  Co.  v.  Mobile,  175 
U.  S.  109,  44  L.  ed.  92;  Hamilton  Gaslight  &  Coke  Co.  v.  Hamilton, 
146  U.  S.  258,  36  L.  ed.  963,  37  Fed.  832;  Joplin  v.  Southwest  Missouri 
Light  Co.,  191  U.  S.  150,  48  L.  ed.  127;  Knoxville  Water  Co.  v.  Knox- 
ville,  200  U.  S.  22,  50  L.  ed.  353;  New  Orleans  Waterworks  Co.  v. 
Rivers,  115  U.  S.  674,  29  L.  ed.  525;  Vicksburg  v.  Vicksburg  Water- 
works Co.,  202  U.  S.  453,  50  L.  ed.  1102;  Walla  Walla  v.  Walla  Walla 
Water  Co.,  172  U.  S.  1,  43  L.  ed.  341. 

UTAH.— Brummitt  v.  Ogden  Waterworks  Co.,  33  Utah  289,  93 
Pac.  828. 


§  150  PUBLIC  UTILITIES.  I92 

good  general  statement  of  the  principle  under  discus- 
sion and  indicates  that  the  courts  are  inclined  to  find  in 
municipalities  whatever  power  is  necessary  to  enable 
them  to  contract  for  their  public  utility  service  to  the 
best  advantage.  In  the  course  of  its  decision  the  court 
says :  "Assuming,  as  I  have,  that  the  city  had  au- 
thority, under  the  general  welfare  clause  in  its  charter, 
to  enter  into  this  contract,  and  that  it  did  not,  as  the 
decisions  stood  at  the  time  the  contract  was  made, 
create  a  debt  in  violation  of  the  constitution  of  the 
state,  there  is  nothing,  so  far  as  I  have  been  able  to 
see,  and  certainly  nothing  has  been  brought  to  the 
attention  of  the  court,  under  the  statutes  and  decisions 
of  this  state  which  would  prevent  the  city  of  Colum- 
bus from  making  an  exclusive  contract  for  a  limited 
period,  if  that  contract  was  a  necessary  and  indis- 
pensable incident  to  the  contract  for  a  supply  of  water. 
That  such  a  grant  of  an  exclusive  privilege  was  neces- 
sary and  indispensable  to  the  main  undertaking  of  the 
city  seems  to  me  to  be  beyond  question.  Considering 
the  size  of  the  city  of  Columbus  at  the  time  this  con- 
tract was  entered  into,  and  the  number  of  its  inhabi- 
tants, it  would  have  been  an  impossibility  to  have  had 
any  one  enter  into  a  contract  of  this  sort,  if  the  parties 
so  contracting  were  to  be  met  immediately,  or  soon 
thereafter,  with  competition  from  another  water- 
works company,  or  from  the  city  itself  engaging  in  the 
business  of  supplying  water  to  the  city  and  its  inhabi- 
tants. Such  a  contract  would  have  been  utterly  value- 
less, and  no  one  would  have  undertaken  the  expendi- 
ture necessary  for  the  establishment  of  such  a  system 
of  water-works  as  was  contemplated  by  this  contract, 
and  was  actually  established,  unless  they  had  been 
guaranteed  an  exclusive  right  for  some  reasonable 
period  at  least  for  rendering  the  service  and  receiving 
the    return    expressed    in    the    contract.      Competition 


193  CONTRACTS    OF    MUNICIPALITIES.  §  1 51 

from  other  parties,  or  from  the  city,  would,  of  course, 
have  destroyed  the  entire  value  of  the  outlay.  It  is 
clear  that  responsible  parties  would  not  have  entered 
into  any  such  contract  except  for  its  exclusive  char- 
acter." 

§  151.  Exclusive  contract  formerly  denied  valid- 
ity.— The  early  decision  of  the  case  of  State  ex  rel. 
Attorney  General  v.  Cincinnati  Gas-Light  &  Coke 
Co.,  18  Ohio  262,  decided  in  1868,  in  denying  the 
power  of  the  city  to  make  an  exclusive  contract  for 
service  for  a  period  of  twenty-five  years  no  longer 
represents  the  weight  of  authority  although  the  deci- 
sion is  expressly  put  on  the  ground  which  still  obtains 
that  necessity  is  the  test  of  the  extent  of  the  power 
which  the  city  may  exercise  in  the  making  of  such 
contracts.  In  the  course  of  its  decision  the  court  says: 
"The  authority  to  make  the  contract  must  therefore 
be  found,  if  at  all,  in  the  general  grant  of  power  to 
cause  the  city  to  be  lighted  with  oil  or  gas.  This 
power  carries  with  it,  by  implication,  all  such  powers 
as  are  clearly  necessary  for  the  proper  and  convenient 
exercise  of  the  power  expressly  granted;  hence  we  see 
no  reason  to  doubt  that  the  city  council  might,  by 
contract,  provide  for  the  lighting  of  the  city  by  gas; 
and  as  the  use  of  the  streets  and  alleys  for  the  pur- 
pose of  laying  gas  pipes  therein  would  be  almost  if  not 
wholly  indispensable  to  such  an  undertaking,  it  would 
clearly  be  competent  for  the  city  council  to  grant  to 
the  contracting  party  the  right  to  such  use.  But  no 
such  necessity  is  perceived  for  making  such  right 
exclusive." 

The  case  of  Nelson  v.  Murfreesboro,  179  Fed.  905, 
decided  in  1909,  however,  indicates  that  there  is  pres- 
ent day  authority  for  the  position  that  the  city  may  not 
make  a  contract  for  exclusive  service  although  it  may 
13— Pub.  Ut. 


§  152  PUBLIC  UTILITIES.  I94 

believe  such  a  condition  to  be  necessary  to  secure  a 
contract  advantageous  to  itself  and  its  citizens,  for  as 
the  court  says :  "It  is  obvious  that  if  the  city  council, 
as  an  incident  to  its  express  pov^^er  to  make  a  contract 
for  lighting  the  streets  of  the  city,  could  incorporate 
as  a  term  of  the  contract  an  exclusive  franchise  for 
furnishing  gas  and  electricity  for  heat,  light,  and  power 
to  the  inhabitants  of  the  city,  because  it  believed  this 
to  be  necessary  and  proper  in  order  to  obtain  a  satis- 
factory contract  for  lighting  the  streets,  it  could  like- 
wise, by  parity  of  reasoning,  give,  as  a  part  of  the  con- 
sideration, an  exclusive  franchise  for  a  water-works 
or  for  a  street  railway  system,  or  incorporate  into  the 
contract  for  street  lighting  any  other  exclusive  fran- 
chise of  a  public  character  which  it  might  deem  neces- 
sary and  proper  in  order  to  obtain  a  satisfactory  con- 
tract for  street  lighting." 

§  152.     Right  to  regulate  rates  to  be  conserved. — 

The  case  of  Brummitt  v.  Ogden  Waterworks  Co.,  33 
Utah  289,  93  Pac.  828,  decided  in  1908,  indicates  that 
while  the  city  may  contract  for  its  entire  service  for 
the  period  of  fifty  years  it  can  not  bind  itself  as  to  the 
rates  to  be  paid  for  such  service  during  the  entire 
period,  as  this  right  to  exercise  the  legislative  author- 
ity in  question  can  not  be  surrendered  to  this  extent, 
but  must  remain  in  the  municipality  to  be  exercised 
whenever  the  interest  of  the  city  requires,  for  as  the 
court  says:  "It  is  elementary  that,  unless  such  right 
is  expressly  made  exclusive,  it  is  not  to  be  construed 
so,  except  by  unavoidable  implication  arising  from  the 
terms  used  in  the  grant.  As  is  well  expressed  some- 
times, if  it  is  in  doubt,  the  grant  fails.  If  we  assume, 
however,  that  the  city  agreed  to  purchase  all  the 
water  used  by  it  from  the  company  for  the  full  term 
of  fifty  years,  it  must  still  be  conceded  that  in  so  doing 


195  CONTRACTS    OF    MUNICIPALITIES.  §  1 53 

it  contravened  no  positive  statute  of  this  state.  .  .  . 
Municipalities  in  this  state,  therefore,  can  not  enter 
into  binding  contracts  with  regard  to  the  rates  for 
service  rendered  to  the  public.  The  right  to  regulate 
and  fix  rates  can  not  be  surrendered,  and  the  duty  to 
exercise  the  right,  whenever  the  rates  are,  or  become, 
excessive,  can  be  enforced  at  any  time.  The  attempt 
to  suspend  the  right  by  an  ordinance  in  no  way  af- 
fected the  city,  and  conferred  no  right  upon  the  com- 
pany." 

§  153.  Contract  executed  by  municipality  as  busi- 
ness concern. — That  such  contracts  are  entered  into  by 
the  municipality  in  its  private  business  capacity  and 
not  in  the  exercise  of  its  governmental  or  legislative 
powers  and  are  therefore  subject  to  the  ordinary  prin- 
ciples of  contracts  is  the  effect  of  the  decision  in  the 
case  of  Little  Falls  Electric,  &c.  Co.  v.  Little  Falls, 
102  Fed.  663,  decided  in  1900,  where  the  court  said: 
"The  contracts  under  which  the  water  and  light  plants 
were  constructed  and  operated  appear  to  be  valid,  and 
should  be  enforced.  The  village  council,  and  subse- 
quently that  of  the  city,  was  authorized  and  empow- 
ered to  contract  for  the  construction  of  such  plants, 
and  for  the  supply  of  water  and  light  for  public  uses, 
and  had  the  right  to  grant  the  use  of  the  streets  for 
such  purposes.  .  .  .  Contracts  on  the  part  of  a 
municipality  for  the  supply  to  the  municipality  and  to 
its  citizens  of  water  and  light  are  not  made  in  the 
exercise  of  the  governmental  powers  vested  in  the 
municipal  council,  but  of  its  proprietary  or  business 
powers  and  .  .  .  are  governed  by  the  same  rules 
that  govern  contracts  of  private  individuals  and  cor- 
porations. .  .  .  No  authority  is  cited  tending  to 
sustain  the  proposition  that  thirty  years  is  an  unrea- 
sonable length  of  time  for  a  contract  to  supply  a  city 


§  154  PUBLIC   UTILITIES.  I96 

with  water  .  .  .  and  it  can  not  be  said  that  these 
contracts  were  unreasonable  in  respect  to  the  time  they 
were  to  run." 

§  154.  Contract  for  excessive  period  void. — Where 
the  contract  period  exceeds  that  expressly  provided  for 
in  the  statute,  the  courts  agree  in  holding  that  the 
contract  is  void  as  to  the  excess  period  and  most  of 
the  cases  also  hold  that  it  is  entirely  void  for  the  reason 
that  having  attempted  to  execute  a  single  contract 
beyond  its  power  to  contract,  nothing  remains  for  the 
agreement  is  not  severable  and  as  it  can  not  stand 
as  made  it  must  fall  in  its  entirety.  Accordingly  in 
the  case  of  GasHght  &  Coke  Co.  of  New  Albany  v. 
New  Albany,  156  Ind.  406,  59  N.  E.  176,  decided  in 
1901,  after  quoting  from  the  case  of  Wellston  v.  Mor- 
gan, 59  Ohio  St.  147,  52  N.  E.  127,  in  holding  a  con- 
tract to  be  wholly  invalid  providing  for  the  Hghting 
of  the  city  beyond  the  period  authorized  by  law  and 
not  merely  invalid  as  to  the  excess  period,  the  court 
says :  "Besides,  it  is  elementary  that  municipal  officers 
have  no  powers  beyond  those  expressly  conferred  by 
statute,  or  necessarily  implied,  to  enable  them  to  make 
effective  the  powers  granted  or  to  protect  the  public 
welfare.  Therefore,  when  they  attempt  an  act  which 
is  beyond  the  hmit  of  their  power,  the  act  has  no 
official  sanction,  and  is  no  more  effectual  than  if 
performed  by  non-official  persons.  As  a  municipal  act 
it  is  wholly  void,  and,  being  void,  nothing  of  sub- 
stance may  flow  from  it.  A  reputable  author,  in  re- 
viewing the  power  of  municipal  corporations  to  make 
contracts,  and  in  considering  the  particular  question 
now  before  us,  uses  this  language:  'When  a  munici- 
pal council  is  authorized  by  statute  to  contract  for  a 
period  not  exceeding  ten  years,  its  contract  for  twenty 
years  or  for  an  indefinite  time  can  not  be  sustained  as 


197  CONTRACTS    OF    MUNICIPALITIES.  §  1 55 

a  contract  for  ten  years,  but  is  entirely  void.'  Beach, 
Mod.  Law  Cont.,  sec.  1148.  See,  also,  3  Cook,  Corp. 
(4th  ed.),  sec.  927;  Manhattan  Trust  Co.  v.  Dayton, 
59  Fed.  327;  State  v.  Harrison,  46  N.  J.  L.  79;  Somer- 
set V.   Smith    (Ky.),  49  S.   W.  456." 

§  155.  Contract  with  duration  not  fixed  is  optional, 
not  perpetual. — Where,  however,  the  duration  of  the 
contract  is  not  fixed  it  will  not  be  held  to  be  perpetual, 
for  in  effect  it  amounts  to  an  agreement  which  may 
be  terminated  at  any  time  on  reasonable  notice  by 
either  party,  for  as  the  court  in  the  case  of  Risley  v. 
Utica,  179  Fed.  875,  decided  in  1910,  says:  "The  com- 
pany did  not  agree  to  supply  water  for  any  length  of 
time,  but  the  city  agrees  to  pay  at  the  rate  and  on  the 
basis  stated  so  long  as  the  company  supplies  water. 
These  same  pipes  and  conduits  convey  the  water  of 
the  company  for  supplying  the  citizens  of  Utica  for 
which  they  pay  at  certain  established  rates.  The  city 
is  a  customer,  but  pays  for  its  supply  on  an  entirely 
different  basis.  I  have  no  doubt  that  the  city  of 
Utica,  assuming  that  the  said  contract  was  assignable 
and  duly  assigned  to  the  Consolidated  Water  Com- 
pany and  is  binding  during  the  election  or  consent  of 
both  parties  to  operate  under  it,  may  terminate  such 
contract  on  giving  due  and  reasonable  notice  of  its 
election  so  to  do.  It  is  not  a  contract  that  can  be 
enforced  in  perpeutity  by  either  party.  There  is  no 
word  or  clause  in  it  that  binds  the  company  to  continue 
to  furnish  water  under  it,  and  I  do  not  think  the  city 
could  compel  specific  performance  for  all  time.  Neither 
can  the  company.  It  is  not  mutually  enforcible.  Its 
continuance  is  optional,  but  to  terminate  same  notice 
must  be  given  and  a  reasonable  time  fixed  when  such 
termination  shall  take  effect." 


§  156  PUBLIC   UTILITIES.  1 98 

§  1560  Municipal  contract  not  exclusive  unless  ex- 
pressly made  so. — The  case  of  Cunningham  v.  Cleve- 
land, 98  Fed.  657,  decided  in  1899,  furnishes  a  good 
statement  and  illustration  of  the  legal  principle  that  a 
contract  for  such  service  entered  into  by  the  municipal- 
ity w^ith  a  private  corporation  is, not  exclusive  unless 
made  so  expressly,  the  court  saying:  'Tt  is  true  that  the 
city  binds  itself  to  use  for  itself  forty  public  hydrants 
and  eighteen  public  lights;  but  it  might  at  once,  vv^ith- 
out  the  slightest  infraction  of  the  contract,  agree  to  rent 
forty  other  public  hydrants  and  eighteen  other  public 
lights  from  other  persons  or  companies  than  the 
grantees  of  these  franchises.  .  .  .  There  is  only 
one  case  which  would  support  the  contention  of  ap- 
pellee upon  this  head.  That  is  City  of  Brenham  v. 
Water  Co.,  67  Tex.  542,  4  S.  W.  143.  If  that  case 
can  not  be  distinguished  from  the  case  at  bar,  it  suf- 
fices to  say  that  we  do  not  agree  with  it.  .  .  . 
The  truth  is  that  it  is  most  difficult  to  reconcile  with 
the  Brenham  case  the  decision  of  the  Supreme  Court 
of  the  United  States  in  Walla  Walla  v.  Walla  Walla 
Water  Co.,  172  U.  S.  i,  43  L.  ed.  341,  for,  though  the 
Supreme  Court  points  out  one  or  two  distinctions 
between  the  Brenham  ordinance  and  the  Walla  Walla 
ordinance,  the  main  fact  remains  that  in  each  ordinance 
the  city  gave  to  the  water  company  the  right  to  use 
the  streets  and  furnish  water  for  a  period  of  years,  and, 
for  the  water  to  be  furnished  for  strictly  public  use, 
agreed  to  pay  a  stipulated  sum  for  the  same  period." 

§  157.  Impairment  of  franchise  rights  by  competi- 
tion not  prohibited. — That  the  effect  of  contracting 
with  or  creating  another  municipal  public  utility  does 
not  violate  the  contract  rights  or  interests  protected 
by  the  constitution  where  the  former  company  did  not 
secure  an  exclusive  right  or  franchise  is  well  expressed 


199  CONTRACTS    OF    MUNICIPALITIES.  §  1 58 

in  the  case  of  Revere  Water  Co.  v.  Winthrop,  192 
Mass.  455,  78  N.  E.  497,  207  U.  S.  604,  52  L.  ed.  360, 
decided  in  1906,  in  the  following  language:  "This  act 
was  passed  to  enable  the  town  to  supply  its  inhabitants 
with  water,  and  whether  the  public  interests  would  be 
served  by  conferring  such  authority  was  for  the  legis- 
lature to  determine.  It  is  manifest  that  if  an  indepen- 
dent system  might  be  thus  established,  the  defendant's 
property  probably  would  be  diminished  in  value,  and 
its  business  perhaps  destroyed  by  reason  of  the  com- 
petition, but  the  company  under  St.  1882,  p.  loi, 
c.  142,  by  which  it  was  incorporated,  enjoyed  no  vested 
rights  which  gave  it  immunity  from  this  contingency, 
or  rendered  such  legislative  action  unconstitutional. 
Nor  is  legislation  of  this  nature  an  appropriation  of 
private  property  for  a  public  use  without  due  process 
of  law  under  the  fourteenth  amendment  to  the  federal 
Constitution." 

§  158.  Contract  not  exclusive  to  preserve  competi- 
tion.— That  the  purpose  of  the  courts  in  adhering  to 
this  principle  is  to  avoid  the  creation  of  a  monopoly 
which  would  stifle  competition  and  that  for  this  reason 
they  will  refuse  to  uphold  a  contract  for  exclusive 
service  by  a  public  utility  is  shown  by  the  early  deci- 
sion in  the  case  of  Western  Union  Tel.  Co.  v.  Ameri- 
can Union  Tel.  Co.,  65  Ga.  160,  38  Am.  Rep.  781, 
decided  in  1880,  where  the  court  says:  "It  is  well 
known  that  rapid  inter-communication  between  dif- 
ferent points  by  wire  and  rail  has  created  a  wonderful 
revolution  in  commercial  operations.  Producers,  con- 
sumers, manufacturers,  merchants,  buyers,  sellers,  all 
are  brought  in  close  proximity,  and  daily  intelligence 
is  given  of  the  world's  transactions.  Trade  is  en- 
couraged, industrial  enterprise  stimulated,  and  busi- 
ness   in    all    its    various    branches    builds    itself    upon 


§159  PUBLIC  UTILITIES.  200 

knowledge.  In  war  the  rapid  communication  of  intel- 
ligence is  almost  incalculable;  in  peace  it  is  scarcely- 
less  so.  Shall  the  means  then  by  which  it  is  trans- 
mitted be  monopolized  by  a  contract  between  two 
artificial  beings,  invisible,  intangible,  and  existing 
only  in  contemplation  of  law?  When  such  exclusive 
rights  exist,  or  such  monopolies  are  established,  the 
same  should  be  done  by  a  legislative  grant,  and  not  by 
an  individual  contract.  Our  judgment  therefore  is 
that  these  contracts  are  especially  made  and  entered 
into  to  cripple  and  prevent  competition,  and  that  they 
thereby  enable  the  plaintiff  in  error  to  fix  its  tariff  of 
rates  at  a  maximum,  governed  alone  by  the  necessities 
of  its  patrons.  Such  contracts  are  not  favored  by  the 
law;  they  are  against  the  pubHc  policy,  because  they 
tend  to  create  monopolies,  and  are  in  general  re- 
straint of  trade." 

§  159.  Contract  for  division  of  territory  among 
competitors  void. — For  the  same  reason  the  courts  re- 
fuse to  uphold  a  contract  between  two  competing  pub- 
lic utility  companies,  the  purpose  and  effect  of  which 
is  to  destroy  competition  and  restore  a  monopolistic 
condition  by  dividing  the  territory  between  them,  for 
as  the  court  says  in  the  case  of  Chicago  Gas-Light  & 
C.  Co.  V.  People's  Gas-Light  &  C.  Co.,  121  111.  530, 
13  N.  E.  169,  2  Am.  St.  124,  decided  in  1887:  "Under 
its  charter,  appellant  had  the  right  to  make  and  sell 
gas  to  be  used  for  lighting  all  the  divisions  of  the  city 
of  Chicago,  and  all  of  the  streets  and  buildings  therein. 
It  had  as  much  power  and  authority  to  lay  pipes  in  the 
streets  of  the  West  division  as  in  those  of  the  North 
and  South  divisions.  By  the  contract,  it  agreed  to  lay 
no  mains  or  pipes  in  the  West  division,  nor  to  furnish 
or  sell  any  gas  to  persons  living  there,  for  a  period  of 
one  hundred  years.     It  thereby  bound  itself  to  avoid 


201  CONTRACTS    OF    MUNICIPALITIES.  §  l6o 

the  performance  of  a  duty  which  it  owed  to  the  public. 
The  manufacture  and  distribution  of  illuminating  gas 
by  means  of  pipes  or  conduits  placed,  under  legislative 
authority,  in  the  streets  of  a  town  or  city,  is  a  business 
of  a  public  character;  it  is  the  exercise  of  a  franchise 
belonging  to  the  state.  The  services  rendered,  and  to 
be  rendered,  for  such  grants  are  of  a  public  nature. 
Where  the  right  to  make  and  sell  gas  to  the  city  and 
its  inhabitants,  under  the  conditions  here  named,  is 
conferred  upon  a  company,  it  is  so  conferred  as  well 
for  the  benefit  of  the  public  as  of  the  company.  .  .  . 
But  the  appellant  binds  itself,  by  the  contract  now 
under  consideration,  to  surrender  and  abandon  al- 
together, for  one  hundred  years,  all  the  right 
conferred  upon  it  by  its  charter  to  manufacture  and 
vend  gas  in  the  West  division.  By  so  doing  'it  aband- 
oned a  public  duty,'  and  a  court  of  equity  will  not  aid 
either  party  in  the  enforcement  of  such  a  contract. 
.  .  .  The  contract  between  these  corporations  tends 
to  create  and  perpetuate  a  monopoly  in  the  furnishing 
of  gas  to  the  city,  and  is  therefore  against  public 
policy." 

§  1 60.     Exclusiveness  of  franchise  may  be  waived. 

— The  counterpart  of  this  situation  is  furnished  in  the 
case  of  St.  Louis  v.  St.  Louis  Gaslight  Co.,  70  Mo.  69, 
decided  in  1879,  where  the  court  upholds  the  contract 
between  two  corporations  providing  public  utilities 
whereby  the  one  relinquishes  its  exclusive  contract 
rights  for  the  benefit  of  another  with  the  apparent 
effect  of  creating  competition.  In  upholding  this  con- 
tract the  court  says:  "This  right  to  exclude  com- 
petition was  not  a  right  vested  in  the  company  for  the 
benefit  of  the  public,  because  in  its  very  nature  it 
was  injurious  to  the  public;  but  it  was  a  right  vested 
in  the   company  for  its   own  benefit,  which   it  might, 


§  l6l  PUBLIC  UTILITIES.  202 

therefore,  surrender  with  the  consent  of  its  stock- 
holders. .  .  .  We  think  it  clear  that  the  St.  Louis 
Gaslight  Company  did  nothing  more  than  surrender 
its  right  to  exclude  all  competition  in  that  part  of  the 
city  lying  north  of  Washington  avenue,  reserving  to 
itself  the  right  to  meet  any  demand  which  might  law- 
fully be  made  upon  it  by  the  public.  There  is  no  aban- 
donment or  surrender  on  the  part  of  the  St.  Louis 
Gaslight  Company  of  its  right,  or  surrender  or  aban- 
donment of  its  duty  to  make  and  vend  gas  north  of 
the  south  line  of  Washington  avenue. 

Nor  does  the  contract  transfer  to  the  Laclede 
Gaslight  Company  the  right  to  make  and  vend  gas  in 
that  district.  The  Laclede  Gaslight  Company  ob- 
tained its  right  to  make  and  vend  gas,  not  from  the 
St.  Louis  Gaslight  Company,  but  from  the  act  of  the 
General  Assembly  incorporating  it,  subject,  of  course, 
to  the  vested  rights  of  the  St.  Louis  Gaslight  Com- 
pany." 

§  i6i.  Contract  limiting  service  to  exclude  com- 
petition void. — The  case  of  Central  New  York  Tel. 
&  T.  Co.  V.  Averill,  199  N.  Y.  128,  92  N.  E.  206,  32 
L.  R.  A.  (N.  S.)  494,  decided  in  1910,  is  a  recent  in- 
teresting decision,  the  effect  of  which  is  to  hold  invalid 
the  contract  of  a  hotel  for  exclusive  service  with  one 
telephone  company  by  refusing  to  enjoin  the  hotel 
from  contracting  with  a  competing  company  for  addi- 
tional service.  The  decision  recognizes  the  fact  that 
the  contract  for  such  exclusive  service  because  of  the 
nature  of  the  utility  furnished  necessarily  discommodes 
the  public  at  large  by  making  it  impossible  for  any  of 
the  citizens  to  communicate  with  the  hotel  except  the 
customers  of  the  particular  telephone  company.  In 
the  course  of  its  decision  the  court  indicates  the  rea- 
son upon  which  it  is  based  in  the  following  language: 


203  CONTRACTS    OF    MUNICIPALITIES.  §  l6l 

"It  is  manifest  that  the  exclusive  clause  is  a  contract 
in  restraint  of  trade.  It  prevents  anyone  in  the  Yates 
Hotel  from  having  telephone  communication  w^ith  cus- 
tomers of  other  telephone  companies  than  the  plaintiff. 
It  prevents  the  persons  served  by  such  other  compa- 
nies from  having  telephonic  communication  with  the 
Yates  Hotel.  It  likewise  destroys  competition  by 
shutting  out  all  rivals  of  the  plaintiff.  .  .  .  The 
feature  of  the  modern  telephone  system  which  consti- 
tutes its  public  value  and  affects  it  with  a  public  in- 
terest is  its  ability  to  bring  each  customer  into  vocal 
communication  with  hundreds  and  oftentimes  thou- 
sands of  others.  This  makes  it  an  instrument  of  great 
public  convenience  and  utiHty,  the  usefulness  of  the 
service  offered  by  each  company  being  directly  pro- 
portionate to  the  number  of  persons  who  can  be 
reached  thereby.  The  franchise  having  been  granted 
because  of  this  very  element — that  is  to  say,  the  ca- 
pacity to  serve  the  community  so  generally  by  serving 
so  large  a  number  of  individuals  constituting  the  com- 
munity— it  can  not  be  tolerated  that  any  grantee  of 
the  franchise  shall  exercise  it  in  such  a  way  as  to  les- 
sen the  value  of  the  telephone  as  an  instrumentality 
of  service  to  the  public.  If  a  telephone  company  may 
contract  for  the  exclusion  of  any  other  telephone  serv- 
ice from  the  premises  of  its  customers,  it  may  thus 
deprive  all  those  customers  of  telephone  communica- 
tion with  every  person  who  takes  telephone  service 
from  rival  concerns,  and  thus  prevent  just  what  all 
telephone  franchises  are  designed  to  promote — that  is, 
the  availability  to  every  member  of  the  community 
who  desires  it,  and  can  afford  to  pay  for  it,  of  the 
most  extensive  telephone  service  attainable. 
It  is  sometimes  argued  that  the  presence  of  two  tele- 
phone systems  in  a  given  district  is  a  disadvantage 
to  the  community,  which  is  best  served  by  one  system 


§  1 62  PUBLIC  UTILITIES.  204 

reaching  all  subscribers;  but  one  system  will  never  be 
made  to  reach  all  subscribers  as  cheaply  as  would 
otherwise  be  the  case  if  the  possibility  of  competition 
is  destroyed." 

§  162.  Contract  for  unnecessary  service  unreason- 
able and  invalid. — The  limitation  beyond  which  the 
courts  will  not  permit  the  municipality  to  go  in  con- 
tracting for  its  public  utility  service  for  the  sake  of 
preventing  the  abuse  of  the  discretionary  power  vested 
in  the  municipahty  is  well  stated  in  the  case  of  Flynn 
V.  Little  Falls  Electric  &  Water  Co.,  74  Minn.  180, 
yy  N.  W.  38,  78  N.  W.  106,  decided  in  1898,  where  the 
court  says:  "Little  Falls  was  and  is  a  new  and  small 
city,  whose  future  was  uncertain.  Thirty  years  is  al- 
most a  generation,  and,  in  this  age,  a  long  time  in  the 
history  of  any  community.  It  has  been  attempted  to 
bind  it  for  that  length  of  time  to  pay  for  between  35 
and  40  per  cent,  more  hydrants  than  its  present  needs 
require,  and  to  pay  for  them  100  per  cent,  more  than 
their  present  value.  It  may  never  need  any  such  num- 
ber of  hydrants,  and  the  value  of  their  use  may  never 
increase  so  as  to  equal  the  price  agreed  to  be  paid. 
For  these  reasons  we  are  of  the  opinion  that  the  pro- 
visions of  this  ordinance,  providing  that  the  city  should 
pay  this  price  for  this  number  of  hydrants  for  thirty 
years  is,  as  to  time,  unreasonable  and  void,  as  being 
beyond  the  scope  of  the  authority  of  the  municipal  au- 
thorities." 

§  163.  Perpetual  contract  void. — The  case  of 
Westminster  Water  Co.  v.  Westminster,  98  Md.  551, 
56  Atl.  990,  64  L.  R.  A.  630,  103  Am.  St.  424,  decided 
in  1904,  holds  void  a  perpetual  contract  for  the  water 
supply  of  the  defendant  city.  The  opinion  contains  a 
brief  summary  of  some  of  the  cases  deciding  what  are 


205  CONTRACTS    OF    MUNICIPALITIES.  §  164 

reasonable  periods  for  such  contracts.  It  thus  shows 
that,  "in  the  case  of  New  Orleans  Waterworks  Co.  v. 
Rivers,  115  U.  S.  674,  29  L.  ed.  525,  a  contract  for 
fifty  years  was  sustained;  in  Walla  Walla  v.  Walla 
Walla  Water  Co.,  172  U.  S.  i,  43  L.  ed.  341,  a  con- 
tract for  twenty-five  years  was  sustained;  in  Vicks- 
burg  Waterworks  Co.  v.  Vicksburg,  185  U.  S.  65,  46 
L.  ed.  808,  a  contract  for  thirty  years  was  held  not 
unreasonable." 

§  164.  Contract  tending  to  exclude  municipality 
strictly  construed. — Unless  the  municipality  clearly 
provides  in  its  contract  for  service  that  it  will  not  it- 
self acquire  and  operate  a  similar  municipal  public 
utility  the  courts  will  not  find  by  implication  that  it 
has  done  so  for  the  reason  that  the  rule  of  strict  con- 
struction would  prevent  and  for  the  further  reason 
that  a  finding  to  the  contrary  would  preclude  the  mu- 
nicipality from  a  further  exercise  of  any  control  over 
the  situation,  although  it  had  not  expressly  agreed  to 
preclude  itself  in  this  way  from  continuing  to  regulate 
and  control  the  question,  so  that  as  held  in  the  case  of 
Meridian  v.  Farmers'  L.  &  T.  Co.,  143  Fed.  67,  decided 
in  1906,  "Unless  there  can  be  found  in  the  contract  in 
question  words  clearly  depriving  the  city  of  Meridian 
of  the  right  to  build,  own,  and  operate  water-works, 
the  court  should  not  by  implication  give  such  effect 
to  the  contract.  The  grant  to  Kuhn,  which  was  trans- 
ferred to  the  Meridian  Waterworks  Company,  should 
be  strictly  construed  against  the  grantee,  and  what- 
ever was  not  unequivocally  granted  is  withheld.  Knox- 
ville  v.  Knoxville  Water  Company,  212  U.  S.  i,  53  L. 
ed.  371.  .  .  .  The  city  not  having  bound  itself  by 
contract  not  to  build  and  operate  water-works  of  its 
own,  the  legislature  authorizing  it  to  do  so,  and  its 
ordinances  pursuant  to  such  legislation,  do  not  impair 


§  1 64  PUBLIC  UTILITIES.  2o6 

the  obligation  of  its  contract.  .  .  .  The  fact  that 
the  competition  of  the  city  in  the  operation  of  its  own 
water-works  will  lessen  the  value  of  the  water-works 
company's  plant  does  not  amount  to  a  taking  of  prop- 
erty without  due  process  of  law,  within  the  meaning 
of  the  Federal  Constitution,  nor  to  a  taking  of  prop- 
erty without  just  compensation,  within  the  meaning 
of  the  Constitution  of  the  state  of  Mississippi.  Hele- 
na Waterworks  Co.  v.  Helena,  195  U.  S.  383,  49  L. 
ed.  245." 

A  recent  decision  of  the  Supreme  Court  of  the 
United  States  directly  on  this  question  is  found  in  the 
case  of  Knoxville  Water  Co.  v.  Knoxville,  200  U.  S. 
22,  50  L.  ed.  353,  decided  in  1906,  where  the  action 
was  to  enjoin  the  defendant  city  from  erecting  and 
operating  a  water-works  system  in  competition  with 
that  of  the  plaintiff,  who  claimed  the  exclusive  right 
to  render  such  service  by  virtue  of  a  contract  wherein 
the  said  city  agreed  "not  to  grant  to  any  other  person 
or  corporation,  any  contract  or  privilege  to  furnish 
water  to  the  city  of  Knoxville  or  the  inhabitants  there- 
of for  a  period  of  thirty  years."  In  speaking  of  this 
contract  the  court  said:  "We  fail  to  find  in  it  any 
words  necessarily  importing  an  obligation  on  the  part 
of  the  city  not  to  establish  and  maintain  water-works 
of  its  own  during  the  term  of  the  water  company. 
.  .  .  The  stipulation  in  the  agreement  that  the  city 
would  not,  at  any  time  during  the  thirty  years  com- 
mencing August  I,  1883,  grant  to  any  person  or  cor- 
poration the  same  privileges  it  had  given  to  the  water 
company,  was  by  no  means  an  agreement  that  it  would 
never,  during  that  period,  construct  and  maintain 
water-works  of  its  own." 

§  165.     Municipality  may  exclude  itself  expressly. 

— But    even   where    the    statute    does    not    permit    the 


207  CONTRACTS    OF    MUNICIPALITIES.  §  l66 

municipal  corporation  to  grant  an  exclusive  franchise 
or  make  an  exclusive  contract  for  service,  the  courts 
still  hold  that  it  may  preclude  itself  by  the  terms  of 
a  franchise  and  contract  for  such  service  from  itself 
entering  into  competition  w^ith  its  grantee  for  a  rea- 
sonable period.  The  case  of  Walla  Walla  v.  Walla 
Walla  Water  Co.,  172  U.  S.  i,  43  L.  ed.  341,  decided 
in  1898,  is  the  leading  one  embodying  this  principle  of 
law.  In  sustaining  a  franchise  and  an  agreement  on 
the  part  of  the  city,  made  under  proper  statutory  au- 
thority for  securing  the  supply  of  these  public  utilities 
by  private  capital,  which  expressly  excluded  the  mu- 
nicipal corporation  for  the  period  of  twenty-five  years 
provided  in  the  franchise  and  contract  from  engaging 
in  competition  with  such  private  enterprise  in  supply- 
ing these  utilities  to  itself  and  its  inhabitants,  the  court 
took  the  position  that  it  was  in  effect  nothing  more 
than  an  express  promise  to  carry  out  the  agreement  of 
its  franchise  to  the  company  in  good  faith;  and  held  that 
such  a  limitation  on  its  own  power  did  not  amount  to 
the  granting  of  a  franchise  exclusive  of  all  competition 
which  the  charter  of  the  city  in  question  expressly 
provided  could  not  be  done. 

§  166.  Municipality  excluded  by  exclusive  contract. 
— The  case  of  Vicksburg  v.  Vicksburg  Waterworks 
Co.,  202  U.  S.  453,  50  L.  ed.  1102,  decided  in  May, 
1906,  is  concerned  with  the  question  under  discussion 
in  the  two  former  cases  and  its  decision  is  based  ex- 
pressly on  the  Walla  Walla  case.  The  court  indicated 
its  intention  to  give  full  credit  to  the  authority  of  the 
Knoxville  Water  Co.  case  by  saying:  "And  unless  the 
city  has  excluded  itself  in  plain  and  explicit  terms 
from  competition  with  the  [private]  water-works  com- 
pany during  the  period  of  this  contract,  it  can  not  be 
held  to  have  done  so  by  mere  implication.     The  rule, 


§  1 66  PUBLIC  UTILITIES.  208 

as  applied  to  water-works  contracts,  was  last  an- 
nounced in  this  court  in  Knoxville  Water  Co.  v.  Knox- 
ville,  supra."  The  court,  by  Day,  J.,  then  proceeds  to 
find  in  the  franchise  under  construction  in  the  case  an 
agreement  binding  on  the  city  which  excluded  it  from 
owning  and  erecting  such  a  plant  during  the  period 
of  such  franchise  by  virtue  of  the  fact  that  it  had  been 
made  in  terms  exclusive  for  such  period.  The  court 
said:  "We  can  not  conceive  how  the  right  can  be 
exclusive,  and  the  city  have  the  right,  at  the  same 
time,  to  erect  and  maintain  a  system  of  water-works 
which  may,  and  probably  would,  practically  destroy 
the  value  of  rights  and  privileges  conferred  in  the 
grant." 


CHAPTER  XI. 

DURATION   OF  FRANCHISE. 

Section. 

167.  State  can  grant  perpetual  franchise  if  constitutional. 

168.  Municipal  franchise  not  perpetual  under  implied  power. 

169.  Construction  against  perpetual  franchises. 

170.  Duration  of  municipal  grants  limited  to  retain  control. 

171.  Duration  not  expressly  fixed  varies. 

172.  Duration  fixed  by  discretion  of  municipality. 

173.  Duration  of  franchises   defined. 

174.  General  or  special  franchise  of  state  may  be  perpetual. 

175.  Power  of  state  and  municipality  to  grant  perpetual  franchise 

distinguished. 

176.  Perpetual  franchise  generally  also  exclusive. 

177.  Duration  of  franchise  limited  to  life  of  grantor. 

178.  Duration  limited  to  life  of  grantee  to  retain  continuous  control 

179.  Duration  of  franchise  strictly  construed  against  grantee. 

180.  Duration  of  life  of  grantee  similar  to  grant  of  life  estate. 

181.  Duration  of  franchise  and  service  contract  same. 

182.  Duration  of  franchise  not  fixed,  optional. 

183.  Franchise  for  excessive  period  entirely  void. 

184.  Perpetual  franchise  upheld  as  one  for  reasonable  time. 

185.  Franchise  limited  to  life  of  easement  in  street. 

186.  Perpetual  franchise  under  New  York  decisions. 

187.  Duration  of  franchise  limited  by  statute  in  New  York. 

188.  Duration  of  franchise  of  state  on  acceptance  perpetual. 

189.  Whether  unlimited  municipal  franchise  is  property  and  per- 

petual. 

§  167.  State  can  grant  perpetual  franchise  if  con- 
stitutional.— Because  the  power  of  the  state  over  all 
pubHc  highways,  including  the  streets  of  municipali- 
ties, is  supreme,  a  perpetual  grant  when  made  by  the 
state  of  the  privilege  of  using  the  streets  or  other 
highways  for  the  purpose  of  furnishing  municipal  pub- 
lic utilities  is  clearly  valid  unless  such  a  grant  is  in 
conflict  with  the  constitution.     Indeed,  it  must  be  ax- 

14— Pub.  ut.  209 


§  l68  PUBLIC  UTILITIES.  2IO 

iomatic  that,  having  supreme  power  to  grant  fran- 
chises creating  a  body  corporate  and  at  the  same  time 
complete  control  over  the  use  of  all  rural  highv^ays 
and  streets  w^hich  are  necessary  for  the  municipal  pub- 
lic utility  to  enjoy  its  franchise  rights  and  to  provide 
its  service,  the  state  can  grant  to  any  company  in 
perpetuity  the  exclusive  right  to  own  and  operate  a 
public  utility  in  any  particular  locality  in  the  absence 
of  a  constitutional  limitation. 

§  1 68.  Municipal  franchise  not  perpetual  under 
implied  power. — The  power  of  a  municipal  corpora- 
tion, however,  to  grant  special  franchise  privileges,  as 
before  stated,  is  necessarily  limited  by  the  power  con- 
ferred upon  it  for  that  purpose  by  the  state.  And  as 
the  courts  have  consistently  held  that  power  to  grant 
exclusive  franchises  will  not  be  found  in  municipal 
corporations  by  implication  nor  that  franchises  granted 
by  the  municipality  will  by  implication  be  found  ex- 
clusive, it  follows  that  the  power  of  municipal  corpo- 
rations to  grant  perpetual  franchises  will  not  be  found 
by  implication  nor  will  a  franchise  when  so  granted  be 
construed  as  a  grant  in  perpetuity  by  implication.  To 
find  that  a  perpetual  franchise  has  been  granted  by  a 
municipahty,  the  power  to  grant  such  a  franchise  must 
first  be  found  in  the  municipality  and  the  intention  to 
make  such  a  grant  must  be  clearly  indicated  in  the 
franchise. 

§  169.     Construction    against    perpetual    franchises. 

— For  the  purpose  of  retaining  in  the  municipal  cor- 
poration the  control  of  its  streets  and  the  furnishing 
of  its  public  utility  service  the  courts  have  refused  to 
imply  power  in  the  municipality  to  grant  perpetual 
franchises  or  by  implication  to  find  a  franchise  to  be 
perpetual,  for  the  same  reason  and  to  the  same  extent 


211  DURATION   OF    FRANCHISE.  §  I/O 

that  they  have  consistently  maintained  that  the  power 
to  grant  exclusive  franchises  will  not  be  found  in  mu- 
nicipalities by  implication  and  that  the  franchise  will 
not  be  treated  as  exclusive  unless  it  was  clearly  so  in- 
tended. Indeed,  for  the  purpose  of  retaining  the  nec- 
essary control  over  the  services  rendered  by  municipal 
public  utilities  it  is  more  necessary  and  important  that 
the  franchise  be  not  perpetual,  for  such  control  must 
be  provided  if  ever  adequately  in  the  franchise  itself, 
than  that  the  court  refuse  to  find  by  implication  that 
exclusive  franchise  rights  have  been  granted.  For  a 
perpetual  franchise  would  of  necessity  in  practically 
all  cases  mean  an  exclusive  franchise  as  well,  and  the 
power  to  grant  a  franchise  in  perpetuity  and  thereby 
surrender  all  power  of  control,  not  provided  for  in  the 
grant  or  expressly  retained,  is  necessarily  much  greater 
than  the  power  to  grant  a  franchise  for  a  limited 
period ;  and,  of  course,  it  is  much  more  difficult  accu- 
rately to  anticipate  changing  conditions,  which  affect 
the  cost  of  production,  and  new  inventions  and  the 
opportunities  they  present  of  affording  other  conven- 
iences for  the  city  and  its  inhabitants,  as  well  as  the 
future  cost  of  supply  and  other  essential  matters  of 
business  administration  and  control  for  all  time  other 
than  for  a  fixed  period. 

§  170.  Duration  of  municipal  grants  limited  to  re- 
tain control. — In  the  light  of  past  experience  municipal 
corporations  and  their  inhabitants  have  evidently  suf- 
fered great  inconvenience  and  have  been  subjected  to 
many  disadvantages  as  the  result  of  the  granting,  it 
not,  indeed,  the  giving,  of  franchises  without  cost  or 
condition,  or  at  least  any  adequate  provision  for  the 
proper  control  over  the  service  to  be  rendered  and  the 
rates  to  be  paid  therefor,  because  the  municipal  au- 
thorities   making  the    grant    failed   fully   to   appreciate 


§  171  PUBLIC  UTILITIES.  212 

the  future  needs  and  opportunities  of  its  citizens  as 
well  as  the  reduction  in  cost  of  the  service  on  account 
of  improved  conditions  resulting  from  new  inventions 
and  superior  agencies  for  furnishing  the  service. 
Where,  therefore,  the  period  of  duration  of  the  fran- 
chise is  not  provided  by  its  terms  the  courts,  with  a 
few  exceptions,  to  be  noted,  have  consistently  held 
that  the  franchise  period  must  be  limited  to  that  pro- 
vided by  the  statutory  authority  vesting  in  the  munic- 
ipality the  power  to  make  the  grant  in  any  event;  or 
if  there  is  no  period  of  limitation  fixed  by  the  legis- 
lature, the  grant  is  limited  to  the  life  of  the  grantee 
or  of  the  municipality  granting  it  or  to  the  easement 
or  right  of  the  public  to  use  the  streets  for  transpor- 
tation, and  that  no  franchise  can  be  granted  for  an 
unreasonable  period. 

§  171.  Duration  not  expressly  fixed  varies. — The 
courts  have  formulated  no  definite  rule  defining  the 
period  of  a  franchise  that  is  not  fixed  by  its  terms 
which  is  generally  accepted  by  all  of  them.  Different 
periods  have  been  adopted  in  different  jurisdictions, 
due  perhaps  for  the  most  part  to  varying  statutory 
provisions  and  to  different  constructions  of  the  rule  as 
applied  to  cases  other  than  municipal  public  utilities; 
and  as  already  suggested,  a  few  decisions,  including 
those  concerning  New  York  City,  have  held  that  in 
such  cases  the  franchise  granted  must  be  held  to  be 
perpetual.  In  the  latter  cases  it  is  well  to  remember 
that  the  title  of  the  streets  in  New  York  City  is  in 
the  city  itself,  and  not,  as  is  the  general  rule,  in  the 
abutting  property  owners  who  hold  their  title  subject 
to  the  right  or  easement  in  the  public  to  use  them  for 
the  purpose   of  transportation   and   communication. 

§  172.  Duration  fixed  by  discretion  of  municipal- 
ity.— The  duration  of  the  franchise  granted  so  long  as 


213  DURATION    OF    FRANCHISE.  §  1 73 

it  is  not  perpetual  is  a  matter  for  the  determination 
of  the  municipal  authorities,  and  in  the  exercise  of 
their  discretion  they  may  fix  it  for  such  term  as  seems 
most  expedient  and  advantageous  to  the  municipality, 
except  where  otherwise  provided  by  legislative  author- 
ity, and  except  in  cases  of  the  clear  abuse  of  such  dis- 
cretion in  the  granting  of  a  franchise  for  an  unrea- 
sonable period.  Where  the  period  is  fixed  the  grant 
need  not  be  limited  to  the  life  of  the  grantee  as  de- 
fined in  its  charter,  and  franchise  grants  have  been 
upheld  for  periods  equal  to  those  permitted  in  the 
making  of  contracts  for  public  utility  service,  which 
we  have  heretofore  found  may  run  for  twenty-five, 
thirty,  or  even  fifty  years. 

§  173.  Duration  of  franchises  defined. — A  discus- 
sion of  some  of  the  leading  decisions  defining  the  dif- 
ferent franchise  periods  in  connection  with  the  reasons 
given  for  their  different  limitations  will  assist  in  de- 
fining the  principle  as  enunciated  and  applied  in  the 
different  jurisdictions.^ 

1  FEDERAL.— Boise  City  Artesian  Hot  &  Cold  Water  Co.  v. 
Boise  City,  123  Fed.  232;  Boise  City,  Idaho,  v.  Boise  Artesian  H.  & 
C.  Water  Co.,  186  Fed.  705;  Des  Moines  City  R.  Co.  v.  Des  Moines, 
151  Fed.  854;  Detroit  v.  Detroit  City  R.  Co.,  56  Fed.  867;  Levis  v. 
Newton,  75  Fed.  884;  Logansport  R.  Co.  v.  Logansport,  114  Fed.  688, 
192  U.  S.  604,  48  L.  ed.  584;  Louisville  Trust  Co.  v.  Cincinnati,  76 
Fed.  296;  Mercantile  Trust  Co.  v.  Denver,  161  Fed.  769;  Omaha  Elec- 
tric Light  &  Power  Co.  v.  Omaha,  179  Fed.  455;  Sioux  Falls  v. 
Farmers'  Loan  &  Trust  Co.,  136  Fed.  721;  Denver  v.  Mercantile 
Trust  Co.,  201  Fed.  790. 

ILLINOIS.— People  ex  rel.  Chicago  v.  Chicago  Tel.  Co.,  220  111. 
238,  77  N.  E.  245;  People  ex  rel.  Schallberg  v.  Central  Union  Tel. 
Co.,  232  111.  260,  83  N.  E.  829. 

INDIANA.— Hester  v.  Greenwood,  172  Ind.  279,  88  N.  E.  498. 

IOWA.— State  ex  rel.  County  Atty.  v.  Des  Moines  City  Ry.  Co. 
(la.),  140  N.  W.  437. 

KENTUCKY.— Somerset  v.  Smith,  105  Ky.  678,  49  S.  W.  456; 
Truesdale  v.  Newport.  28  Ky.  L.  840,  90  S.  W.  589. 

MASSACHUSETTS.— Boston  Electric  Light  Co.  v.  Boston  Termi- 
nal Co.,  184  Mass.  566,  69  N.  E.  346;  Natick  Gaslight  Co.  v.  Natick, 


§174  PUBLIC  UTILITIES.  214 

§  174.  General  or  special  franchise  of  state  may 
be  perpetual. — The  case  of  Louisville  v.  Cumberland 
Tel.  &  T.  Co.,  224  U.  S.  649,  56  L.  ed.  934,  decided 
in  1912,  contains  a  good  statement  of  the  principle 
that  the  state  itself  may  grant  a  municipal  public  util- 
ity a  perpetual  franchise,  including  not  only  the  right 
to  be  a  body  corporate,  but  to  own  and  maintain  a 
public  utility  within  a  municipality.  This  case  decides 
that  the  municipality  having  given  its  consent  to  the 
use  of  its  streets  for  such  municipal  public  utility  by 
ratifying  and  confirming  the  statute  creating  the  cor- 

175  Mass.  246,  56  N.  E.  292;  New  England  Tel.  &  T.  Co.  v.  Boston 
Terminal  Co.,  182  Mass.  397,  65  N.  E.  835. 

MICHIGAN.— Sullivan  v.  Bailey,  125  Mich.  104,  83  N.  W.  996; 
Wyandotte  Electric  Light  Co.  v.  Wyandotte,  124  Mich.  43,  82  N.  W. 
821. 

MINNESOTA.— Reed  v.  Anoka,  85  Minn.  294,  88  N.  W.  981; 
State  ex  rel.  St.  Paul  v.  Minnesota  Transfer  R.  Co.,  80  Minn.  108, 
83  N.  W.  32.  50  L.  R.  A.  656. 

OHIO.— Cincinnati  Gas  Light  &  Coke  Co.  v.  Avondale,  43  Ohio 
St.  257,  1  N.  E.  527;  East  Ohio  Gas  Co.  v.  Akron,  81  Ohio  33,  90  N. 
E.  40;  Wellston  v.  Morgan,  59  Ohio  St.  147,  52  N.  E.  127. 

OREGON.— Joseph  v.  Joseph  Waterworks  Co.,  57  Ore.  586,  111 
Pac.  864. 

NEW  JERSEY.— State  (Hudson  Tel.  Co.)  v.  Jersey  City,  49  N. 
J.  L.  303,  60  Am.  Rep.  619,  8  Atl.  123;  Suburban  Electric  L.  &  P. 
Co.  V.  East  Orange  Township,  59  N.  J.  Eq.  563,  41  Atl.  865. 

NEW  YORK.— Blaschko  v.  Wurster,  156  N.  Y.  437,  51  N.  E.  303; 
People  V.  O'Brien,  111  N.  Y.  1,  18  N.  E.  692,  72  L.  R.  A.  255,  7  Am. 
St.  684;  People  ex  rel.  Woodhaven  Gaslight  Co.  v.  Deehan,  153  N. 
Y.  528,  47  N.  E.  787. 

TEXAS.— Houston  v.  Houston  City  St.  R.  Co.,  83  Tex.  548,  19 
S.  W.  127,  39  Am.  St.  679. 

UNITED  STATES.— Blair  v.  Chicago,  201  U.  S.  400,  50  L.  ed. 
801;  Louisville  v.  Cumberland  Tel.  &  T.  Co.,  224  U.  S.  649,  56  L.  ed. 
934;  St.  Clair  County  Turnpike  Co.  v.  People  of  Illinois,  96  U.  S.  63, 
24  L.  ed.  651;  Boise  Artesian  H.  &  C.  Water  Co.  v.  Boise  City, 
U.  S.  Adv.  Sh.  Aug.  1,  1913,  p.  997,  Detroit  .United  Ry.  v.  Detroit, 
229  U.  S.  39,  57  L.  ed.  — ;  Old  Colony  Trust  Co.  v.  Omaha,  U.  S.  Adv. 
Sh.  Aug.  1,  1913,  p.  967;  Owensboro  v.  Cumberland  Tel.  &  T.  Co., 
U.  S.  Adv.  Sh.  Aug.  1,  1913,  p.  988. 

VERMONT.— Barre  v.  Perry  &  Scribner,  82  Vt.  301,  73  Atl.  574. 

WASHINGTON.— Seattle  v.  Columbia  &  P.  S.  R.  Co.,  6  Wash. 
379,  83  Pac.  1048. 


215  DURATION    OF    FRANCHISE.  §  1 74 

poration  and  granting  the  consent  of  the  state  to  own 
and  operate  a  public  utility  as  such,  the  right  became 
vested  in  the  municipal  public  utility  in  perpetuity, 
although  no  time  for  its  duration  was  fixed  expressly 
in  the  charter.  The  court,  recognizing  the  size  of  the 
investment  and  the  permanency  of  the  improvements 
necessary  to  own  and  operate  a  general  telephone 
system,  held  such  right  could  not  be  terminated  nor 
impaired  by  subsequent  action  nor  objection  on  the 
part  of  the  city,  for  as  the  court  said:  "But  the  mu- 
nicipality could  not  by  an  ordinance  impair  that  con- 
tract nor  revoke  the  rights  conferred.  Those  charter 
franchises  had  become  fully  operative  when  the  city's 
consent  was  given,  and  thereafter  the  company  occu- 
pied the  streets  and  conducted  its  business,  not  under 
a  license  from  the  city  of  Louisville,  but  by  virtue 
of  a  grant  from  the  state  of  Kentucky.  Such  fran- 
chises granted  by  the  legislature  could  not,  of  course, 
be  repealed,  nullified,  or  forfeited  by  any  ordinance 
of  a  general  council.  .  .  .  Inasmuch,  therefore,  as 
the  charter  of  the  Ohio  Valley  Telephone  Company 
was  granted  and  as  the  exchanges  were  in  operation 
before  the  adoption  of  the  constitution,  that  company's 
rights  are  expressly  preserved  by  the  organic  law  of 
the  state.  ...  In  the  present  case  the  Ohio  Valley 
Company  was  by  its  charter  given  authority  to  mort- 
gage and  dispose  of  franchises.  Among  those  thus 
held  was  the  right  to  use  the  streets  in  the  city  for  the 
purpose  necessary  in  conducting  a  telephone  business. 
.  .  .  With  the  knowledge  and  acquiescence  of  the 
city,  and  in  reliance  on  the  statutory  conveyance  of 
the  street  rights,  the  Cumberland  Company,  at  an 
expense  of  more  than  a  million  dollars,  erected  many 
new  poles,  laid  additional  conduits,  and  strung  miles 
of  wire  in  extending  and  improving  the  telephone  sys- 
tem. This  action  of  the  council  could  not  enlarge  the 
charter  grant,  but  did  operate  to  estop  the  city  (Boone 


§  174  PUBLIC  UTILITIES.  2l6 

County  V.  Burlington  &  M.  River  R.  Co.,  139  U.  S. 
693),  from  claiming  that  the  ordinance  was  inopera- 
tive, and  it  also  prevented  the  council  from  denying 
that  the  Cumberland  Company  had  succeeded  to  every 
right    and   obligation    of    the    Ohio    Valley    Company. 

None  of  these  decisions  are  applicable  to  a  case  like 
the  present,  where  the  Ohio  Valley  Telephone  Com- 
pany, with  a  perpetual  charter,  has  received,  not  from 
the  municipality,  but  from  the  state  of  Kentucky,  the 
grant  of  an  assignable  right  to  use  the  streets  of  a 
city  which  remains  the  same  legal  entity,  although  by 
a  later  statute  it  has  been  put  in  the  first  class  and 
given  greater  municipal  powers.  Vilas  v.  Manila,  220 
U.  S.  345- 

In  considering  the  duration  of  such  a  franchise  it  is 
necessary  to  consider  that  a  telephone  system  can  not 
be  operated  without  the  use  of  poles,  conduits,  wires, 
and  fixtures.  These  structures  are  permanent  in  their 
nature  and  require  a  large  investment  for  their  erec- 
tion and  construction.  To  say  that  the  right  to  main- 
tain these  appliances  was  only  a  license,  which  could 
be  revoked  at  will,  would  operate  to  nullify  the  char- 
ter itself,  and  thus  defeat  the  state's  purpose  to  secure 
a  telephone  system  for  public  use.  For,  manifestly, 
no  one  would  have  been  willing  to  incur  the  heavy 
expense  of  instaling  these  necessary  and  costly  fixtures 
if  they  were  removable  at  will  of  the  city,  and  the 
utility  and  value  of  the  entire  plant  be  thereby  de- 
stroyed. Such  a  construction  of  the  charter  can  not 
be  supported,  either  from  a  practical  or  technical 
standpoint. 

This  grant  was  not  at  will,  nor  for  years,  nor  for 
the  life  of  the  city.  Neither  was  it  made  terminable 
upon  the  happening  of  a  future  event;  but  it  was  a 
necessary    and   integral   part    of   the    other   franchises 


217  DURATION    OF    FRANCHISE.  §  1 75 

conferred  upon  the  company,  all  of  which  were  per- 
petual, and  none  of  which  could  be  exercised  without 
this  essential  right  to  use  the  streets." 

§  175.  Power  of  state  and  municipality  to  grant 
perpetual  franchise  distinguished. — The  case  of  Boise 
City  Artesian  Hot  &  Cold  Water  Co.  v.  Boise  City, 
123  Fed.  232,  decided  in  1903,  clearly  distinguishes 
between  the  power  of  the  state  to  grant  a  perpetual 
franchise  and  the  construction  of  a  franchise  grant  by 
the  state,  and  the  power  vested  in  a  municipality  and 
the  construction  of  a  municipal  grant  in  holding  that 
in  the  one  case  the  grant  may  be  made  or  construed 
as  perpetual,  while  in  the  other  it  will  not  be  so  con- 
strued unless  the  municipality  had  the  power  to  make 
such  a  grant  and  that  it  did  so  expressly,  for  it  would 
not  be  found  by  implication.  The  court  indicates  that 
while  the  constitutional  limitations  in  most  of  the 
states  would  prohibit  such  a  municipal  grant  even  in 
the  absence  of  such  a  limitation  the  municipality  has 
no  such  power,  but  its  grant  must  be  limited  to  a  rea- 
sonable period  in  order  that  it  may  not  disable  itself 
from  exercising  the  control  vested  in  it  by  surrender- 
ing its  power  of  control,  for  as  the  court  said:  "There 
can  be  no  doubt  that  the  grant  of  a  privilege  to  lay 
water  pipes  and  furnish  the  inhabitants  of  a  munici- 
pality with  water  for  a  stated  period  of  time,  accepted 
and  acted  upon  by  the  grantee  thereof,  is  a  grant  of  a 
franchise  given  in  consideration  of  the  performance 
of  a  public  service,  and  is  protected  against  hostile 
legislation  by  the  state.  .  .  .  No  term  was  fixed 
for  the  duration  of  the  privilege,  and  no  contract  was 
in  terms  made  between  the  city  and  the  grantees  of 
the  privilege.  It  is  plain  that  the  ordinance  was  either 
the  grant  of  a  license  revocable  at  the  will  of  the 
grantor,  or,  by  its  acceptance  on  the  part  of  the  gran- 


§  176  PUBLIC  UTILITIES,  2x8 

tee,  it  became  an  irrevocable  and  perpetual  contract. 
.  .  ,  In  the  constitutions  of  nearly  all  the  states  it 
is  provided  that  no  exclusive  or  perpetual  franchises 
shall  be  granted,  and,  irrespective  of  such  constitution- 
al limitation,  it  is  clear,  both  upon  reason  and  author- 
ity, that  no  municipal  corporation,  in  the  absence  of 
express  legislative  authority,  has  power  to  grant  a 
perpetual  franchise  for  the  use  of  its  streets.  .  .  . 
There  can  be  no  doubt  that  under  this  provision  of 
its  charter  the  city  had  the  power  to  grant  the  use  of 
its  streets  for  a  fixed  reasonable  period  of  time,  either 
to  an  individual  or  to  a  corporation,  for  the  purpose 
of  furnishing  a  water  supply  to  the  inhabitants.  It 
had  no  authority,  however,  to  make  a  perpetual  con- 
tract. A  municipal  corporation  intrusted  with  the 
power  of  control  over  its  public  streets  can  not,  by 
contract  or  otherwise,  irrevocably  surrender  any  part 
of  such  power  without  the  explicit  consent  of  the  leg- 
islature." 

§  176.  Perpetual  franchise  generally  also  exclu- 
sive.— In  the  case  of  Omaha  Electric  Light  &  Power 
Co.  V.  Omaha,  179  Fed.  455,  decided  in  1910,  it  was 
contended  that  because  the  grant  of  the  franchise  was 
absolute  in  form  and  contained  no  limitation  upon  its 
duration  it  constituted  a  grant  in  perpetuity,  while 
the  municipality  insisted  that  it  did  not  have  the  power 
to  grant  a  perpetual  franchise  and  that  it  did  not  at- 
tempt to  make  such  a  grant.  The  court  in  construing 
the  power  of  the  municipality  in  harmony  with  the 
position  maintained  by  it,  said:  "Applying  this  rule 
to  the  present  case,  we  are  of  opinion  that  the  confer- 
ence of  power  in  general  terms  to  'provide  for  lighting 
the  streets'  or  'to  care  for  and  control  the  streets'  is 
not  specific  enough  to  warrant  a  grant  by  the  city  to 
a  business  corporation  of  the  right  to  use  the  streets 


219  DURATION    OF    FRANCHISE.  ^  ^77 

of  the  city  forever  for  the  purpose  of  conducting  a 
general  hghting  business.  That  is  a  servitude  not 
embraced  within  the  ordinary  control  over  streets 
usually  given  to  municipalities.  A  perpetual  franchise, 
even  if  not  exclusive  in  fact,  becomes  largely  so  by  the 
advantage  in  the  race  v^hich  preoccupancy  of  the  field 
and  perpetual  right  to  continue  in  it  afford.  And, 
while  it  may  not  be  technically  obnoxious  to  the  con- 
stitutional prohibition  against  'granting  special  privi- 
leges or  immunities,'  it  is  so  unusual  and  extraordinary 
as  to  require,  in  our  opinion,  a  more  specific  legisla- 
tive authorization  than  the  general  language  relied 
on  by  the  company  therefor.  We  therefore  conclude 
that,  even  if  the  mayor  and  council  had  intended  to 
grant  a  perpetual  franchise  to  the  company,  they  were 
powerless  to  do  so." 

§  177.  Duration  of  franchise  limited  to  life  of 
grantor. — That  the  period  of  limitation  is  fixed  by 
the  life  of  the  municipality  itself  so  that  when  the 
municipality  is  annexed  to  another  the  franchise  rights 
granted  by  it  are  thereby  terminated,  is  the  rule  estab- 
lished in  the  state  of  Illinois  and  sustained  by  the 
Supreme  Court  of  the  United  States.  In  the  case  of 
People  ex  rel.  Chicago  v.  Chicago  Tel.  Co.,  220  111. 
238,  yy  N.  E.  245,  decided  in  1906,  the  court  refused 
to  accept  the  position  taken  by  the  defendant,  who  in- 
sisted on  its  right  to  continue  under  the  franchise 
granted  by  a  municipality  which  had  been  annexed 
to  the  city  of  Chicago,  although  the  period  of  the  fran- 
chise was  not  fixed,  and  said:  "The  ground  of  de- 
fendant's claim  that  the  ordinance  does  not  limit  its 
charges  in  the  annexed  territory  is  that  before  the 
annexation  the  minor  municipalities  had  granted  to  it 
the  right  to  occupy  the  streets  therein  for  its  business 
without  any  limit  as  to  time.     If  the  grants  had  been 


§  177  PUBLIC  UTILITIES.  220 

for  terms  of  years  under  legislative  authority  author- 
izing them,  and  the  terms  had  extended  beyond  the 
existence  of  the  corporations  granting  the  privileges, 
there  might  be  ground  for  saying  that  the  grants  were 
binding  upon  the  city  because  they  had  become  bind- 
ing contracts  under  which  the  defendant  had  vested 
contract  rights  for  such  terms.  But  they  were  not 
for  definite  periods,  and  the  grants  were  in  considera- 
tion of  furnishing  something  to  the  town  or  village, 
such  as  telephone  service  to  the  town  or  village  hall 
or  the  village  authorities  free  or  for  some  reduced 
rate.  Such  grants  can  not  be  construed  to  be  per- 
petual, and  at  most  can  not  extend  beyond  the  lives  of 
the  corporations  granting  them.  Upon  annexation,- 
there  ceased  to  be  any  town  or  village  authorities 
entitled  to  the  benefits  of  the  contract  or  authorized 
to  demand  or  receive  them,  and  it  could  not  have  been 
understood  that  the  grant  should  continue  discharged 
of  the  obligation  annexed  to  it.  .  .  .  The  ordi- 
nances of  the  city  extended  over  the  annexed  territory 
immediately  upon  annexation  (Illinois  Central  Rail- 
road Co.  V.  City  of  Chicago,  176  U.  S.  646),  and  the 
limitations  of  the  ordinance  applied  to  the  annexed 
territory.  .  .  .  To  construe  the  ordinance  otherwise 
would  be  to  say  that  whenever  any  improvement  is 
made  in  the  service,  the  defendant  may  rid  itself  of  all 
its  obligations  with  respect  to  rates  and  still  enjoy 
the  grant — may  retain  the  benefits  and  escape  the  bur- 
dens of  the  contract.  .  .  .  Under  the  ordinance,  the 
defendant  can  not  be  required  to  adopt  improvements 
in  the  service  or  equipment  or  to  keep  up  with  the 
general  progress  in  the  business,  but  if  it  sees  fit  to 
adopt  improvements  and  furnish  a  better  grade  of  tele- 
phone service,  it  can  only  have  the  benefit  of  the  ordi- 
nance  granting  it  the  right  to  use  the   public  streets 


221  DURATION    OF    FRANCHISE.  §  1 78 

by  complying  with  the  terms  of  the  ordinance  and  not 
increasing   the    rates." 

§  178.  Duration  limited  to  life  of  grantee  to  retain 
continuous  control. — The  importance  of  retaining  con- 
trol in  the  municipality,  which  is  the  justification  for 
the  position  of  the  court  in  refusing  to  imply  that  a 
municipal  grant  was  intended  to  be  perpetual,  is  well 
expressed  in  the  case  of  People  ex  rel.  Schallberg  v. 
Central  Union  Tel.  Co.,  232  111,  260,  83  N.  E.  829,  de- 
cided in  1908,  where  the  court  says:  *Tt  can  not  be 
thought  for  one  moment  that  the  parties  contemplated 
a  continued  occupation  of  the  streets  if  the  posts 
should  be  so  placed  and  the  wires  upon  them  should 
be  kept  at  such  an  elevation  as  to  be  dangerous  to  the 
public  in  the  use  of  the  streets  and  alleys,  or  that  the 
city  should  be  relegated  to  the  slow  process  of  some 
proceeding  to  compel  compliance  with  the  conditions. 
The  city  had  no  power  to  abdicate  its  functions  in  re- 
spect to  the  streets  and  bind  itself  by  an  ordinance  to 
permit  the  continued  enjoyment  of  the  license  in  vio- 
lation of  its  terms  or  the  continuance  of  a  public  nui- 
sance. It  is  of  the  utmost  importance  to  the  public 
that  there  should  be  in  the  city,  charged  with  public 
duties,  some  immediate  and  effective  power  to  insure 
compliance  by  the  defendant  with  the  terms  of  the 
license,  and  surely  the  defendant  would  not  be  per- 
mitted to  occupy  the  streets  without  complying  with 
the  conditions  of  the  ordinance,  or  to  stand  in  defiance 
of  the  city,  and  insist  that  some  other  proceedings 
should  be  begun,  which  after  long  delays  might  result 
in  compelling  obedience  to  the  conditions,  permitting 
the  public  safety  to  be  endangered  or  the  public  right 
delayed  in  the  meantime.     .     .     . 

"The  constitutional  question  must  be  determined 
against    the    people.     The   argument   is   that   the   ordi- 


§  179  PUBLIC  UTILITIES.  222 

nance  is  in  conflict  with  section  14  of  article  2  of  the 
constitution,  as  making  an  irrevocable  grant  of  special 
privileges  and  immunity,  and  is  answered  by  numerous 
decisions  of  this  court,  the  first  of  which  was  Chicago 
City  Railway  Co.  v.  People,  73  111.  541.  The  grant  is 
not  for  any  definite  time,  but  is  for  the  life  of  the  cor- 
poration and  limited  to  that  time  (St.  Clair  County 
Turnpike  Co.  v.  People,  82  111.,  174),  and  the  city  re- 
served the  right  to  grant  to  any  other  company  or 
person  like  permission  for  the  use  of  the  streets.  .  .  . 
The  license  was  not  at  the  will  of  the  city  and  revoca- 
ble at  its  pleasure,  and  the  council  could  not  repeal  it 
so  long  as  the  defendant  complied  with  its  conditions." 

§  179.  Duration  of  franchise  strictly  construed 
against  grantee. — In  the  recent  case  of  Blair  v.  Chica- 
go, 201  U.  S.  400,  50  L.  ed.  801,  decided  in  1906,  the 
Supreme  Court  of  the  United  States  sustained  the 
position  of  the  Supreme  Court  of  Illinois  to  the  effect 
that  where  the  terms  of  the  grant  are  not  clearly  ex- 
pressed or  where  the  intention  of  the  legislature  is 
ambiguous,  they  must  be  strictly  construed  against  the 
grantee  and  the  power  not  expressly  or  clearly  granted 
should  be  withheld.  The  court  in  the  course  of  its  deci- 
sion said:  "What,  then,  was  conferred  in  the  franchise 
granted  by  the  state?  It  was  the  right  to  be  a  corpo- 
ration for  the  period  named,  and  to  acquire  from  the 
city  the  right  to  use  the  streets  upon  contract  terms 
and  conditions  to  be  agreed  upon.  The  franchise  con- 
ferred by  the  state  is  of  no  practical  value  until  sup- 
plemented by  the  consent  and  authority  of  the  council 
of  the  city.  .  .  .  Considering  the  act  as  a  whole,  it 
has  the  effect  to  extend  the  life  of  the  corporations 
to  ninety-nine  years  and  to  authorize  the  use  of  the 
streets  of  Chicago,  with  the  consent  and  upon  terms 
agreed  upon  with  the  council,  and  this  right  may  be 


223  DURATION    OF    FRANCHISE.  §  l8o 

acquired  in  like  manner  during  the  extended  life  of 
the  corporations  for  such  periods  as  may  be  contracted 
for.  Contracts  already  made  are  affirmed  as  made. 
.  .  .  A  construction  can  be  given  it  which  would 
extend  all  the  contracts  with  the  city  for  the  term  of 
ninety-nine  years.  On  the  other  hand,  it  can  be  main- 
tained, with  at  least  equal  force,  that,  notwithstanding 
the  Governor's  view,  it  affirmed  the  contracts  as  made, 
thus  distinctly  recognizing  the  comparatively  short 
term  of  twenty-five  years,  for  which  they  expressly 
stipulated.  It  must  be,  therefore,  uncertain  whether 
the  legislators  voted  for  this  act  upon  one  construction 
or  the  other.  It  may  be  that  the  very  ambiguity  of 
the  act  was  the  means  of  securing  its  passage.  Legis- 
lative grants  of  this  character  should  be  in  such  un- 
equivocal form  of  expression  that  the  legislative  mind 
may  be  distinctly  impressed  with  their  character  and 
import,  in  order  that  the  privileges  may  be  intelli- 
gently granted  or  purposely  withheld.  It  is  matter 
of  common  knowledge  that  grants  of  this  character 
are  usually  prepared  by  those  interested  in  them,  and 
submitted  to  the  legislature  with  a  view  to  obtain 
from  such  bodies  the  most  liberal  grant  of  privileges 
which  they  are  willing  to  give.  This  is  one  among 
many  reasons  why  they  are  to  be  strictly  construed." 

§  1 80.  Duration  of  life  of  grantee  similar  to  grant 
of  life  estate. — That  the  grant  will  be  limited  to  the 
life  of  the  grantee  or  to  the  period  of  its  existence  as 
fixed  in  its  charter  was  first  established  by  the  Su- 
preme Court  of  the  United  States  in  the  case  of  St. 
Clair  County  Turnpike  Co.  v.  People  of  Illinois,  96  U. 
S.  63,  24  L.  ed.  651,  decided  in  1878,  and  since  recog- 
nized as  a  leading  case,  where  the  court  compared  the 
grant  of  the  franchise  to  the  grant  of  an  estate  in 
land  and  by  analog}'  held  that  the  period  of  the  grant 


§  l8o  PUBLIC  UTILITIES.  224 

like  the  giving  of  a  life  estate  in  real  estate  terminated 
with  the  life  of  the  grantee  in  the  absence  of  anything 
in  the  grant  fixing  a  period  definitely.  The  court  said: 
"At  common  law,  a  grant  to  a  natural  person,  without 
words  of  inheritance,  creates  only  an  estate  for  the 
life  of  the  grantee;  for  he  can  hold  the  property  no 
longer  than  he  himself  exists.  By  analogy  to  this,  a 
grant  to  a  corporation  aggregate,  Hmited  as  to  the 
duration  of  its  existence,  without  words  "of  perpetuity 
being  annexed  to  the  grant,  would  only  create  an  es- 
tate for  the  life  of  the  corporation.  In  the  present 
case,  the  Turnpike  Company  was  created  to  continue 
a  corporate  body  only  for  the  term  of  twenty-five  years 
from  the  date  of  its  charter;  and  although,  by  neces- 
sary implication,  a  further  continuance,  with  the  spe- 
cial faculty  of  holding  and  using  the  turnpike  author- 
ized by  the  act  until  redeemed  by  the  state,  is  given  to 
it  for  that  purpose,  yet  it  is  only  by  implication,  aris- 
ing from  the  necessity  of  the  case,  and,  therefore,  can 
not  be  extended  to  other  purposes  and  objects.  Grants 
of  franchises  and  special  privileges  are  always  to  be 
construed  most  strongly  against  the  donee,  and  in 
favor  of  the  public.  We  think  the  Supreme  Court  of 
Illinois  construed  the  grant  liberally  in  this  case,  when 
it  declared  'the  fair  construction'  to  be,  that  it  was 
designed  the  corporation  should  have  the  use  of  the 
bridge  and  dike,  with  the  right  to  take  tolls  thereon, 
until  the  period  fixed  for  the  determination  of  its  ex- 
istence; and  we  think  that  that  period  can  not  be  ex- 
tended by  implication  beyond  the  prescribed  term  of 
twenty-five  years,  except  for  the  purposes  contained 
in  the  charter." 

The  principle  limiting  the  duration  of  the  franchise 
to  the  life  of  the  corporation  to  which  it  is  granted, 
which  was  established  by  the  Supreme  Court  of  the 
United  States  in  the  case  of  St.  Clair  County  Turnpike 


225  DURATION    OF    FRANCHISE.  §  l8l 

Co.  V.  People  of  Illinois,  supra,  has  been  adopted  by 
the  Supreme  Court  of  Michigan  in  connection  with 
municipal  public  utilities,  for  as  this  court  in  the  case 
of  Wyandotte  Electric  Light  Co.  v.  Wyandotte,  124 
Mich.  43,  82  N.  W.  821,  decided  in  1900,  says:  "An  in- 
corporation under  this  act,  a  petition  to  the  city  to 
erect  poles  and  wires,  or  for  a  franchise  for  that  pur- 
pose, and  the  grant  of  the  same  by  the  city,  would 
make  a  contract  binding  for  the  life  of  the  corporation. 
It  would  be  immaterial  that  no  time  for  the  existence 
of  the  right  of  the  franchise  was  specified.  The  grant 
in  such  case  would  be  limited  to  the  period  of  exist- 
ence fixed  by  the  charter." 

§  181.  Duration  of  franchise  and  service  contract 
same. — The  same  court  in  the  later  case  of  Sullivan  v. 
Bailey,  125  Mich.  104,  83  N.  W.  996,  decided  in  1900, 
states  more  fully  the  reason  for  its  adhering  to  the 
rule  limiting  the  duration  of  the  grant  to  the  period 
of  the  corporate  life  of  the  grantee  and  applies  the 
doctrine  of  the  rule  of  strict  construction  by  refusing 
to  find  power  in  the  municipality  to  grant  a  franchise 
for  a  longer  period  than  it  had  power  to  make  a  con- 
tract for  municipal  public  utility  service.  In  the  course 
of  its  opinion  the  court  says:  *Tt  is  manifest  that  the 
legislature  recognized  the  evils  that  had  come  to  mu- 
nicipal corporations  by  granting  the  use  of  the  streets 
for  so  long  a  period.  The  evident  purpose,  therefore, 
in  granting  this  charter  was  to  leave  the  control  of  the 
streets,  at  the  expiration  of  the  ten  years,  entirely 
within  the  power  of  the  common  council.  It  is  urged 
that  neither  persons  nor  corporations  will  make  so 
large  an  investment  if  all  their  rights  to  the  use  of  the 
streets  cease  at  the  end  of  ten  years.  ...  It  seems 
to  me  that  such  result  could  not  have  been  contem- 
plated  by    the    legislature,    and    that    the    language    of 

15— Pub.  rt. 


§  l8l  PUBLIC  UTILITIES.  226 

sections  8  and  ii  is  a  clear  limitation  upon  the  power 
of  the  common  council  to  grant  any  franchise  for  fur- 
nishing light  and  water  beyond  the  ten  years.  .  .  . 
The  word  'contract,'  as  used  in  the  charter,  in  my 
judgment,  means  the  same  as  the  word  'franchise.' 
When  a  franchise  is  proposed,  it  defines  the  terms  of 
its  existence,  and  its  acceptance  completes  the  fran- 
chise or  contract.  Until  the  action  of  the  council  is 
accepted,  there  is  no  franchise  or  contract." 

This  same  principle  is  recognized,  if  not  expressly 
applied,  in  the  case  of  Mercantile  Trust  Co.  v.  Denver, 
i6i  Fed.  769,  decided  in  1908,  where  the  court  says: 
"A  large  part  of  the  argument  was  directed  to  the 
question  as  to  the  length  of  term  of  the  easement — 
the  complainant  contending  that  it  is  in  perpetuity. 
The  ordinance  does  not,  in  express  words,  fix  the  term 
of  the  easement  granted.  And  while  the  defendant 
made  some  claim  that  the  ordinance  gave  a  mere  re- 
vocable license,  that  position  can  not  be  sustained. 
The  defendants  also  cited  authorities  to  the  effect  that 
in  such  a  case  as  this  the  easement  should  be  con- 
strued to  extend  during  the  term  of  the  life  of  the 
grantee.  Louisville  Trust  Co.  v.  Cincinnati,  y^  Fed. 
296,  22  C.  C.  A.  334;  Turnpike  Co.  v.  Illinois,  96  U.  S. 
63;  Toll  Roads  Co.  v.  People,  22  Colo.  429,  45  Pac. 
398,  37  L.  R.  A.  711.  The  defendant's  insistence  on 
the  doctrine  of  these  cases  appeared  as  a  concession 
that  the  rights  of  the  street  car  company  under  the 
ordinance  of  1885,  whatever  they  may  be,  will  not 
expire  until  February  5,  1935;  and  if  such  concession 
be  not  made,  the  rights  granted  to  it  must  extend,  un- 
der the  authorities,  at  least  to  that  time.  This  being 
true,  it  becomes  immaterial,  for  the  purposes  of  this 
case,  to  determine  whether  the  easement  is  in  per- 
petuity.    Until  that  time  in  1935  has  been  reached  it 


227  DURATION    OF    FRANCHISE.  §  l8l 

is  a  moot  question  whether  its  rights  under  the  ordi- 
nance extend  beyond  February  5,   1935." 

The  case  of  Logansport  R.  Co.  v.  Logansport,  114 
Fed.  688,  192  U.  S.  604,  48  L.  ed.  584,  decided  in  1902, 
in  construing  the  power  conferred  upon  this  munici- 
pality of  Indiana  "to  give  consent  upon  such  terms 
and  conditions  as  the  common  council  may  see  fit," 
in  connection  with  the  grant  of  a  special  franchise, 
held  that  "it  was  ultra  vires  of  the  common  council 
to  surrender  its  control  of  the  streets  of  the  city  in 
perpetuity  to   the   complainant." 

The  court  in  the  case  of  Detroit  v.  Detroit  City  R. 
Co.,  56  Fed.  867,  decided  in  1893,  by  way  of  reply  to 
the  argument  that  it  would  be  impossible  to  secure 
the  investment  required  to  install  a  municipal  public 
utility  if  the  right  to  continue  its  use  were  revocable, 
said:  "The  right  of  a  city  council,  under  its  general 
control  of  the  streets,  to  grant  an  irrevocable  ease- 
ment for  the  laying  of  tracks  and  running  of  cars,  has 
several  times  been  considered  by  courts  of  last  resort 
in  this  country,  and  the  great  weight  of  authority  is 
in  favor  of  the  view  that  such  power  does  not  include 
authority  to  convey  a  vested  right  in  the  streets  for 
years,  or  in  perpetuity.  .  .  .  An  inevitable  limita- 
tion thus  arising  is  that  the  easement  shall  not  endure 
beyond  the  life  of  the  franchise,  for  which  the  ease- 
ment is  given.  I  can  not  escape  the  conclusion,  which 
seems  to  me  clear  to  a  demonstration,  that  the  power 
of  consent  to  be  exercised  by  the  city  under  the  stat- 
ute is  limited  in  time  to  the  life  of  the  franchise  to  be 
consented  to.  The  acts  of  the  state  and  city,  together, 
in  granting  the  franchise,  and  consenting  to  its  exer- 
cise, are  equivalent  to  the  grant  of  a  franchise  by  a 
state  legislature,  under  a  constitution  which  permits 
it,   to  a  company  to  lay  its   railway  in   certain   named 


§  l82  PUBLIC   UTILITIES.  228 

Streets  of  a  city  and  to  operate  the  same,  without  the 
intervention  of  the  city  in  the  matter." 

§  182.  Duration  of  franchise  not  fixed,  optional. — 
The  principle  of  refusing  to  find  by.  impHcation  the 
power  in  municipal  corporations  or  their  intention,  as 
expressed  in  the  terms  of  the  franchise,  to  grant  the 
special  privileges  covered  by  the  franchise  in  perpet- 
uity is  clearly  enunciated  by  the  Supreme  Court  of 
Ohio  in  the  case  of  East  Ohio  Gas  Co.  v.  Akron,  8i 
Ohio  33,  90  N.  E.  40,  decided  in  1909,  where  the  court 
holds  that  a  franchise  which  does  not  fix  the  period 
of  its  duration  is  revocable  by  either  party.  In  the 
course  of  its  decision  the  court  says:  "It  is  true  that 
the  ordinance  grants  the  right  to  enter  and  occupy  the 
streets,  but  in  respect  to  the  time  when  it  shall  termi- 
nate its  occupany  and  withdraw  the  ordinan.ce  is  silent. 
May  we  infer  from  this  silence  that  the  gas  company 
has  a  perpetual  franchise  in  the  streets?  We  are  not 
prepared  to  hold  that  the  company  has  thus  acquired 
such  a  perpetual  franchise,  and  we  feel  quite  sure  that 
even  the  defendant  in  error,  on  more  mature  reflection, 
would  not  insist  on  such  a  conclusion.  ...  It 
comes,  then,  to  this:  That,  in  the  absence  of  limita- 
tions as  to  time,  the  termination  of  the  franchise  is 
indefinite,  and  to  preserve  mutuaHty  in  the  contract, 
the  franchise  can  continue  only  so  long  as  both  par- 
ties are  consenting  thereto.  .  .  .  The  city  can  not 
directly  or  indirectly  deprive  the  gas  company  of  its 
property  without  due  process  of  law  when  the  latter 
withdraws  from  the  further  exercise  of  its  franchise. 
204  U.  S.  116." 

The  general  principle  permitting  the  municipality 
to  exercise  its  discretion  in  fixing  the  period  of  dura- 
tion of  the  franchise,  as  well  as  its  other  terms  provided, 
however,  that  no  perpetual  grant  could  be  made  is  well 


229  DURATION    OF    FRANCHISE.  §  183 

expressed  in  the  case  of  Houston  v.  Houston  City  St. 
R.  Co.,  83  Tex.  548,  19  S.  W.  127,  29  Am.  St.  679,  de- 
cided in  1892,  where  the  court  says:  "In  reference  to 
the  second  proposition  submitted  by  the  appellants,  we 
hold  that,  as  the  common  council  had  legislative  au- 
thority to  grant  the  franchise  in  question,  its  duration 
was  a  matter  for  their  exclusive  determination.  Whether 
it  should  be  extended  for  two,  five  or  thirty  years  was 
left  to  their  wisdom  and  discretion.  They  could  not, 
perhaps,  abandon  or  transfer  their  ordinary  control 
over  the  streets  of  a  legislative  character,  so  as  to  pre- 
vent the  proper  and  legitimate  exercise  of  this  author- 
ity by  their  successors  in  office.  But  this,  as  we  have 
seen,  they  did  not  do.  Nor  was  it  in  the  power  of  the 
common  council  to  create  a  perpetuity.  Subject  to 
these  limitations,  however,  the  wisdom  and  reasona- 
bleness of  the  grant,  and  the  length  of  time  during 
which  it  should  continue,  were  addressed  solely  to  the 
good  judgment  of  the  members  of  the  common  coun- 
cil.     I    Dill.   Mun.   Corp.   §  95." 

§  183.    Franchise  for  excessive  period  entirely  void. 

— The  Supreme  Court  of  Kentucky  in  the  case  of 
Somerset  v.  Smith,  105  Ky.  678,  49  S.  W.  456,  decided 
in  1899,  makes  one  of  the  most  exacting  applications 
of  the  rule  of  strict  construction  in  holding  invalid 
the  renewal  of  a  franchise  for  the  maximum  period 
permitted  by  the  constitution  because  the  beginning 
of  such  renewal  period  was  postponed  to  a  date  subse- 
quent to  the  time  of  its  ratification.  The  court  in  the 
course  of  its  decision  says:  "By  section  164  of  the 
constitution  it  is  provided:  'No  county,  city,  town, 
taxing  district  or  other  municipality  shall  be  author- 
ized or  permitted  to  grant  any  franchise  or  privilege, 
or  make  any  contract  in  reference  thereto,  for  a  term 
exceeding    twenty    years.'      It    is    contended    that    this 


§  184  PUBLIC   UTILITIES.  23O 

contract  is  void,  because  in  conflict  with  this  constitu- 
tional provision.  In  this  vv^e  concur.  The  franchise 
or  privilege  is  said  to  be  for  only  twenty  years  from 
its  beginning,  and  that  it  begins  when  the  present 
contract  expires  or  is  terminated.  The  present  con- 
tract expires  in  1900,  and  although  it  is  provided  that 
this  privilege  or  franchise  may  begin  before  that  date, 
and  then  extend  only  twenty  years,  yet  the  contract 
made  is  for  more  than  twenty  years,  as  it  did  not 
begin  on  the  day  of  the  ratification  of  the  contract, 
but  it  is  expressly  postponed  to  some  future  date. 
Whatever  may  be  said  about  the  franchise,  this  is  cer- 
tainly a  contract  in  reference  to  a  franchise,  and  the 
term  contracted  for  exceeds  the  constitutional  limit." 

§  184.  Perpetual  franchise  upheld  as  one  for  rea- 
sonable time. — The  case  of  Levis  v.  Newton,  75  Fed. 
884,  decided  in  1896,  holds  that  although  a  franchise 
may  be  made  in  terms  perpetual,  the  court  will  elim- 
inate this  provision  wherever  possible  and  uphold  the 
franchise  with  this  elimination  because,  having  granted 
a  franchise  for  the  use  of  its  streets  upon  authority 
to  make  such  a  grant,  the  rights  thereby  created  will 
be  preserved  aside  from  the  provision  that  they 
continue  perpetually,  which  provision  being  beyond 
the  power  of  the  city  to  make  is  void;  the  court  ob- 
serving in  part:  "Assuming,  but  not  deciding,  that 
the  city  council  had  no  authority  to  grant  a  'permanent 
and  perpetual'  franchise,  as  .in  Ordinance  No.  129  at- 
tempted, is  the  ordinance  invalid  because  it  contains  a 
section  wherein  such  grant  is  declared  perpetual?  No 
attempt  is  made  in  said  ordinance  to  enter  into  per- 
petual contract  with  the  city  for  lighting  its  streets, 
etc.  It  may  be  assumed  that  such  contract  would  be 
invalid.  The  ordinance,  as  to  time  limit,  only  declares 
that  Vaughn   and  assigns   shall  have   'permanent  and 


231  DURATION    OF    FRANCHISE.  §  184 

perpetual'  right  to  use  the  streets  of  the  city  so  far  as 
necessary  and  proper  for  construction  and  operation 
of  its  plant.  No  constitutional  or  statutory  provision 
of  this  state  bearing  on  the  point  under  consideration 
is  called  to  our  notice." 

This  decision  in  its  attempt  to  uphold  franchise 
rights  by  eliminating  the  perpetual  provision  has  not 
been  generally  followed  and  in  effect  obviously  mate- 
rially changes  the  grant  originally  made,  which  it  will 
be  remembered  the  courts  refused  to  do  in  that  series 
of  cases,  already  referred  to,  where  the  franchise  or 
contract  period  exceeded  that  expressly  fixed  and 
permitted  by  the  statute,  for  in  those  cases  the  court 
held  that  the  entire  agreement  was  void  because  in 
excess  of  the  power  of  the  municipality  and  that  the 
agreement  could  not  be  upheld  for  the  period  permit- 
ted by  the  statute  because  that  was  not  what  the  par- 
ties had  agreed  upon,  because  they  had  made  another 
and  a  materially  different  agreement,  for  as  the  court 
said  in  the  case  of  Wellston  v.  Morgan,  59  Ohio  St. 
147,  52  N.  E.  127,  decided  in  1898:  "But  the  council  had 
power,  under  section  2491,  i  Rev.  St.  (Bates'  ed.), 
to  contract  in  a  legal  way  for  the  lighting  of  its  streets 
and  other  public  grounds  for  a  term  not  exceeding  ten 
years,  and,  upon  its  being  shown  by  the  company  that 
it  had  furnished  light  to  the  city,  which  it  had  ac- 
cepted and  enjoyed,  a  right  to  recover  on  a  quantum 
meruit  would  arise  in  favor  of  the  plaintiff.  .  .  . 
Its  rights  would  not  be  based  upon  contract,  however, 
but  would  result  from  the  conduct  of  the  city  in  giving 
consent  and  direction.  .  .  .  And  this  is  in  accord 
with  the  general  rule  which  is  well  expressed  by  Prof. 
Freeman  in  his  note  to  Robinson  v.  Mayor,  34  Am. 
Dec.  625:  *As  it  [the  municipal  corporation]  is  per- 
mitted to  exercise  the  powers  which  its  charter  au- 
thorizes,   so    it    is    prohibited    from    exercising    those 


§  185  PUBLIC   UTILITIES,  •  232 

which  are  not  authorized.  Any  act  or  attempted  ex- 
ercise of  power  which  transcends  the  Hmits  expressed 
or  necessarily  inferred  from  the  language  of  the  in- 
strument by  which  its  powers  are  conferred  is  beyond 
the  authority  of  a  municipal  corporation,  and  is,  there- 
fore, null  and  void.'  Attention  is  also  called  to  the 
language  of  Follett,  J.,  in  Coke  Co.  v.  Avondale,  43 
Ohio  St.  at  pages  267,  268,  i  N.  E.  531." 

§  185.  Franchise  limited  to  life  of  easement  in 
street. — A  line  of  decisions  from  the  Supreme  Court 
of  Massachusetts,  including  the  case  of  Boston  Elec- 
tric Light  Co.  V.  Boston  Terminal  Co.,  184  Mass.  566, 
69  N.  E.  346,  decided  in  1904,  establishes  this  prin- 
ciple of  refusing  to  find  power  in  the  municipality  by 
implication  to  grant  perpetual  franchises,  in  a  different 
connection  which  emphasizes  the  practical  value  and 
the  necessity  for  the  rule  in  the  interest  of  the  mu- 
nicipality, while  admitting  that  the  public  only  has  an 
easement  in  the  street  or  other  highway  and  that  the 
abutting  owner  has  the  title  in  fee  in  the  property 
subject  to  this  easement.  The  court  holds  that  the 
franchise  whose  period  of  duration  is  not  fixed  must 
be  limited  to  the  easement  which  the  public  has  to 
use  the  street  for  transportation  purposes  and  that 
when  the  street  is  closed  to  public  traffic  by  vacation 
it  is  closed  also  to  the  incidental  use  of  the  munic- 
ipal public  utility.  As  this  use  for  the  means  of  com- 
munication or  for  the  transportation  of  the  conven- 
iences of  municipal  public  utilities  is  subordinate  to 
the  general  public  use  for  purposes  of  transportation, 
it  is  neither  greater  than  nor  inconsistent  with  the 
general  use,  and  where  the  period  is  not  fixed  in  the 
franchise  the  termination  of  the  use  of  the  street  for 
the  general  purpose  of  transportation  also  terminates 
its  use  by  the  municipal  public  utility.     If  it  did  not, 


233  DURATION    OF    FRANCHISE.  §  l86 

the  city  in  closing  the  street  would  be  liable  in  dam- 
ages to  the  municipal  public  utility  and  the  city  would 
be  held  to  have  surrendered  control  over  the  street 
in  this  respect,  which  is  contrary  to  public  policy  and 
to  the  many  decisions  holding  that  the  power  of  con- 
trol over  its  streets  vested  in  a  municipality  does  not 
give  it  the  power  to  surrender  its  control  over  the 
streets. 

It  is  true  that  in  the  case  above  referred  to  the 
franchise  provided  for  the  removal  of  the  poles  erected 
in  connection  with  the  installation  of  the  public  utility 
system  on  the  order  of  the  municipal  authorities,  but 
the  decision  in  this  case  as  well  as  that  by  the  same 
court  in  the  case  of  New  England  Tel.  &  T.  Co.  v. 
Boston  Terminal  Co.,  182  Mass.  397,  65  N.  E.  835, 
decided  in  1903,  is  to  the  effect  that  the  vacation  of 
the  street  under  statutory  authority  terminated  all 
righs  of  the  public  thereto  as  well  as  the  rights  of  the 
municipal  public  utility,  which  were  secured  and  held 
because  their  use  was  similar  to  and  incidental  with 
the  general  right  of  the  public  to  travel  over  and  along 
the  street;  for  as  the  court  expresses  it:  "Their  rights 
in  connection  with  the  rights  of  others  of  the  public 
are  subject  to  reasonable  regulation,  or  even  to  ter- 
mination at  any  time,  if  the  supreme  authority,  acting 
in  the  public  interest,  shall  so  determine.  It  follows 
that  they  have  no  rights  of  property  in  the  street,  and 
their  constructions  that  were  built  therein  were  per- 
sonal property,  which  they  had  a  right  to  remove, 
and  which  could  not  be  subjects  for  the  assessment 
of  damages  under  statutes  of  this  kind." 

§  186.  Perpetual  franchise  under  New  York  de- 
cisions.— In  opposition  to  this  well  established  and 
generally  recognized  principle  stands  the  decision  in 
the  case  of  People  v.  O'Brien,   iii  N.  Y.   i,  18  N.  E. 


§  l86  PUBLIC  UTILITIES.  234 

692,  2  L.  R.  A.  255,  7  Am.  St.  684,  decided  in  1888, 
where  a  franchise  granted  by  New  York  City  to  op- 
erate a  surface  street  railway  in  Broadway,  which  did 
not  provide  for  the  period  of  its  duration,  is  held  to 
have  granted  a  perpetual  right  to  use  the  street  for 
this  purpose.  Several  years  after  the  construction  of 
the  street  railway  system  and  the  giving  of  a  mortgage 
under  statutory  authority  covering  the  property  and 
franchise  the  state  attempted  to  repeal  the  charter  and 
dissolve  the  corporation  in  connection  with  which  a 
receiver  was  appointed  to  take  charge  of  the  property; 
and  the  action  in  the  above  case  was  brought  on  be- 
half of  the  people  of  the  state  against  all  the  parties 
interested  in  the  particular  street  railway  company, 
including  New  York  City.  In  the  course  of  the  opin- 
ion defining  the  various  interests  involved,  the  court 
decided  that  the  franchise  to  maintain  and  operate  the 
street  railway  system  in  Broadway  survived  the  dis- 
solution of  the  corporation  whose  charter  term  of  ex- 
istence was  fixed  at  one  thousand  years.  In  holding 
that,  although  the  corporation  was  chartered  for  this 
limited  period  it  had  the  power  to  take  full  title  to 
such  property  as  was  necessary  for  its  use  and  opera- 
tion and  as  the  special  franchise  permitting  its  use  of 
the  street  was  not  for  a  fixed  period,  the  interest  in 
the  use  of  the  street  which  was  necessary  for  the  main- 
tenance and  operation  of  its  system  was  in  perpetuity, 
the  court  said:  "Among  other  claims  made  by  the 
state,  it  is  contended  that  the  stated  term  of  1,000 
years,  prescribed  in  its  charter  for  the  duration  of 
the  company,  constitutes  a  limitation  upon  the  estate 
granted,  and  that  therefore  the  corporation  took  a 
limited  estate  only  in  its  franchise.  .  .  .  We  think 
this  question  has  been  decided,  by  cases  in  this  court, 
which  are  binding  upon  us  as  authority,  in  favor  of 
the   perpetuity   of  such   estates.     That   a   corporation. 


235  DURATION    OF    FRANCHISE.  §  l86 

although  created  for  a  limited  period,  may  acquire 
title  in  fee  to  lands  or  property  necessary  for  its  use, 
was  decided  in  Nicoll  v.  Railroad  Co.,  12  N.  Y.  121, 
where  it  was  held  that  a  railroad  corporation,  al- 
though created  for  a  limited  period  only,  might  ac- 
quire such  title,  and  that,  where  no  limitation  or  re- 
striction upon  the  right  conveyed  was  contained  in  the 
grant,  the  grantee  took  all  of  the  estate  possessed  by 
the  grantor.  ,  .  .  The  city  had  authority  to  limit 
the  estate  granted,  either  as  to  the  extent  of  its  use 
or  the  time  of  its  enjoyment,  and  also  had  power  to 
grant  an  interest  in  public  streets  for  a  public  use  in 
perpetuity,  which  should  be  irrevocable.  Yates  v.  Van 
De  Bogert,  56  N,  Y.  526.  ...  It  was  clearly  con- 
templated by  its  provisions  that  the  rights  granted 
should  be  exercised  in  perpetuity,  if  public  conven- 
ience required  it,  by  that  corporation  or  those  who 
might  lawfully  succeed  to  its  rights.  When  we  con- 
sider the  mode  required  by  the  statutes  and  the  con- 
stitution to  be  pursued  in  disposing  of  this  franchise, 
the  inference  as  to  its  perpetuity  seems  to  be  irre- 
sistible; for  it  can  not  be  supposed  that  either  the 
legislature  or  the  framers  of  the  constitution  intended 
to  offer  for  public  sale  property  the  title  to  which  was 
defeasible  at  the  option  of  the  vendor,  or  that  such 
property  could  be  made  the  subject  of  successive  sales 
to  different  vendees  as  often  as  popular  caprice  might 
require  it  to  be  done.  Neither  can  it  be  supposed 
that  they  contemplated  the  resumption  of  property 
which  they  had  expressly  authorized  their  grantee  to 
mortgage  and  otherwise  dispose  of,  to  the  destruc- 
tion of  interests  created  therein  by  their  consent.  We 
are  therefore  of  the  opinion  that  the  Broadway  Sur- 
face Railroad  Company  took  an  estate  in  perpetuity 
in  Broadway,  through  its  grant  from  the  city,  under 
the   authoritv   of  the   constitution   and   the   act   of   the 


§  1 86  PUBLIC  UTILITIES.  236 

legislature.  It  is  also  well  settled  by  authority  in  this 
state  that  such  a  right  constitutes  property,  within  the 
usual  and  common  signification  of  that  word."  This 
decision  rests  on  the  authority  of  New  York  alone 
and  expressly  refuses  to  follow  the  Supreme  Court  of 
the  United  States  in  the  case  of  St.  Clair  County  Turn- 
pike Co.  V.  Illinois,  96  U.  S.  63,  24  L.  ed.  651,  already 
discussed. 

The  case  of  People  ex  rel.  Woodhaven  Gaslight 
Co.  V.  Deehan,  153  N.  Y.  528,  47  N.  E.  787,  decided  in 
1897  that  a  franchise  to  install  and  operate  a  gas 
system  is  property  which  can  not  be  destroyed  or  im- 
paired by  the  arbitrary  refusal  of  the  municipality  to 
consent  to  the  laying  of  additional  equipment  in  other 
streets  that  may  have  been  laid  out  after  the  grant  of 
the  franchise,  for  as  the  court  says:  "When  the  right 
to  use  the  streets  has  been  once  granted  in  general 
terms  to  a  corporation  engaged  in  supplying  gas  for 
public  and  private  use,  such  grant  necessarily  contem-. 
plates  that  new  streets  are  to  be  opened  and  old  ones 
extended  from  time  to  time,  and  so  the  privilege  may 
be  exercised  in  the  new  streets  as  well  as  in  the  old. 
Such  a  grant  is  generally  in  perpetuity  or  during  the 
existence  of  the  corporation,  or  at  least  for  a  long 
period  of  time,  and  should  be  given  effect,  according 
to  its  nature,  purpose,  and  duration.  There  is  no  good 
reason  for  restricting  its  operation  to  existing  high- 
ways, unless  that  purpose  appears  from  the  language 
employed." 

This  principle  permitting  the  use  of  additional 
streets  and  the  developing  of  other  territory  that  may 
become  a  part  of  the  municipality  after  the  granting 
of  the  franchise  is  in  accord  with  the  general  rule 
which  recognizes  the  probability  of  the  growth  of  the 
municipality  and  the  consequent  need  of  the  devel- 
opment and  extension  of  the  municipal  public  utility 


2'>i'J  DURATION    OF    FRANCHISE.  §  187 

service  in  connection  with  such  growth.  The  IlHnois 
decisions  as  heretofore  shown  are  not  inconsistent  with 
this  principle,  but  involve  the  converse  of  this  proposi- 
tion, for  they  hold  that  the  franchise  granted  to  any 
particular  municipal  public  utility  extends  with  the 
growth  of  the  city,  thus  making  one  integral  and 
harmonious  system  with  the  same  rights  and  condi- 
tions provided  in  a  common  franchise.  These  author- 
ities only  show  the  necessity  of  holding  that  the  ter- 
ritory annexed  by  the  growth  of  the  municipality 
becomes  an  integral  part  of  it  with  the  necessary  re- 
sult that  the  municipal  corporation  annexed  is  termi- 
nated as  an  independent  municipality,  consolidated 
and  merged  in  the  municipal  corporation  to  which  it 
is  annexed,  and  that  with  the  termination  of  its  ex- 
istence as  an  independent  legal  entity  its  franchise 
rights  granted  for  an  indeterminate  period  also  ter- 
minate, and  that  in  lieu  of  this  there  are  substituted 
the  franchise  rights  and  conditions  of  the  annexing 
municipality. 

§  187.  Duration  of  franchise  limited  by  statute  in 
New  York. — The  case  of  Blaschko  v.  Wurster,  156 
N.  Y.  437,  51  N.  E.  303,  decided  by  the  New  York 
Supreme  Court  ten  years  after  its  decision  in  the  case 
of  People  V.  O'Brien,  supra,  and  the  year  following 
that,  in  the  case  of  People  v.  Deehan,  supra,  indicates 
the  change  made  by  the  legislature  in  this  jurisdiction 
limiting  the  power  of  the  municipality  to  the  granting 
of  franchises  for  periods  not  to  exceed  twenty-five 
years.  This  action  of  the  legislature  goes  to  confirm 
the  other  decisions,  and  in  effect  to  establish  the  rule 
generally  that  the  municipality  can  not  grant  a  per- 
petual franchise  unless  given  the  power  to  do  so  ex- 
pressly and  that  such  a  franchise  is  contrary  to  public 
policy  and  against  the  general  welfare.     This  decision 


§  187  PUBLIC  UTILITIES.  238 

of  the  highest  court  of  New  York  in  harmony  with  the 
general  rule  of  strict  construction  holds  that  a  charter 
granted  in  perpetuity  in  face  of  the  limitation  of 
twenty-five  years  placed  on  the  power  of  New  York 
City  in  its  charter  to  make  such  a  grant  is  void  in  its 
entirety.  In  the  course  of  its  decision  the  court  says: 
"The  new  charter  was  approved  on  the  4th  day  of 
May,  1897,  before  the  resolution  granting  the  fran- 
chise in  question  was  passed.  Section  73  of  this  stat- 
ute is  as  follows :  *Sec.  73.  After  the  approval  of  this 
act  no  franchise  or  right  to  use  the  streets,  avenues, 
parkways  or  highways  of  the  city  shall  be  granted  by 
the  municipal  assembly  to  any  person  or  corporation 
for  a  longer  period  than  twenty-five  years.'  .  .  . 
And  the  granting  of  street  franchises  to  railroads  by 
the  municipal  assembly  for  more  than  twenty-five  years 
is  one  of  these  forbidden  acts.  .  .  .  What  the  rail- 
road asked,  and  what  the  aldermen  voted,  was  the 
right  in  perpetuity.  .  .  .  The  city  authorities  had 
the  power  to  make  the  grant  for  twenty-five  years, 
but  that  was  not  the  power  that  the  railroad  called 
into  action,  that  the  aldermen  exercised,  or  the  court 
restrained,  but  the  unlimited  power  invoked  and 
claimed  independent  of  the  new  charter.  .  We  should 
construe  the  official  act  which  the  court  restrained  ac- 
cording to  the  spirit  and  intention  with  which  it  was 
performed,  and  in  the  sense  in  which  it  was  viewed 
and  understood  by  the  court  when  the  injunction  was 
granted.  So,  we  are  inclined  to  hold  that  the  consent, 
so  far  as  it  was  given,  was  not  a  valid  exercise  of  the 
power  to  grant  consents  for  twenty-five  years,  and 
therefore  the  second  question  should  be  answered  in 
the  negative."  This  decision  therefore  in  construing 
the  provisions  of  the  charter  granted  New  York  City 
in  1897  harmonizes  that  jurisdiction  with  the  general 
rule. 


239  DURATION    OF    FRANCHISE.  §  1 88 

§  1 88.  Duration  of  franchise  of  state  on  acceptance 
perpetual. — The  case  of  Suburban  Electric  L.  &  P. 
Co.  V.  East  Orange  Township,  59  N.  J.  Eq.  563,  41 
Atl.  865,  decided  in  1898,  in  denying  the  right  of  the 
township  to  rescind  the  privilege  granted  by  it  per- 
mitting the  stringing  of  wires,  in  the  exercise  of  which 
rights  the  public  utility  was  installed  and  an  extended 
investment  made,  held  that  the  right  having  been 
acted  upon,  although  only  a  license,  could  not  be  re- 
voked at  the  pleasure  of  the  party  granting  it.  After 
expressly  recognizing  that  the  right  was  ultimately 
granted  by  the  state,  the  court  held  that  it  must  be 
regarded  as  a  grant  in  perpetuity,  which,  of  course, 
was  within  the  power  of  the  state  to  make,  for  as  the 
court  says:  "Moreover,  the  complainant's  right  to 
string  the  wires  does  not  depend  alone,  if  at  all,  upon 
the  consent  of  the  municipal  authorities;  it  relates 
back  to  the  legislative  authority  to  string  and  maintain 
the  wires  upon  certain  conditions.  No  time  is  fixed 
by  the  legislative  authority  for  the  continuance  of  the 
exercise  of  the  franchise,  and  the  grant  must  be  pre- 
sumed to  be  perpetual,  subject,  it  may  be,  as  it  prob- 
ably is,  to  the  right  of  the  legislature  to  exercise  upon 
it  its  police  powers  from  time  to  time,  as  it  in  its  wis- 
dom may  see  fit." 

The  same  court  in  the  case  of  State  (Hudson  Tel. 
Co.)  V.  Jersey  City,  49  N.  J.  L.  303.  8  Atl.  123,  decided 
in  1887,  however,  after  an  expenditure  of  a  substantial 
sum  by  a  municipal  public  utility  in  connection  with 
the  instalation  of  its  plant  held  that  the  special  fran- 
chise privilege  granted  by  the  municipality  could  not 
then  be  revoked  for  the  reason  that  the  franchise  could 
only  be  repealed  by  the  legislature.  In  the  course  of 
its  decisions  the  court  said:  "I  am  of  the  opinion 
that,  as  a  general  rule,  a  designation  of  streets  by  a 
city  gives  the  company  an  irrevocable  right  to  use  the 


§  189  PUBLIC   UTILITIES.  24O 

Streets  so  designated  for  the  purposes  indicated  in  the 
statute.  Certainly,  after  the  expenditure  of  money  in 
the  erection  of  poles  made  in  reliance  upon  the  munic- 
ipal designation,  the  company  obtains  a  vested  right, 
of  which  they  can  not  be  stripped  by  a  subsequent 
revocation  of  such  designation.  The  notion  that  a 
corporation  which,  under  provisions  similar  to  the 
present  act,  has,  upon  the  strength  of  a  permission  to 
use  a  certain  route,  spent  thousands  of  dollars  in  lay- 
ing railway  tracks  or  subterranean  cables,  or  in  erect- 
ing posts  and  stretching  wires,  is  at  the  mercy  of  the 
city  authorities  continually  and  entirely,  is  not  to  be 
entertained  for  a  moment.  A  view  that  the  rights  of 
the  corporation  are  of  so  unsubstantial  a  character  is 
opposed  to  all  judicial  sentiment,  from  the  Dartmouth 
College  Case,  4  Wheat.  518,  to  the  present  time.  .  .  . 
No  provision  is  contained  in  the  act  under  which  the 
prosecutors  were  incorporated  which  confers  upon  a 
municipality  the  power  to  revoke  a  permission  once 
granted.  The  grant  of  the  franchise  to  this  company 
was  subject  only  to  repeal  or  alteration  by  the  legis- 
lature; and,  when  that  corporation  had  acquired  vested 
rights  in  the  mode  designated  by  their  charter,  it  cer- 
tainly was  not  in  the  power  of  a  common  council  to 
strip  them  of  any  right  so  acquired." 

§  189.  Whether  unlimited  municipal  franchise  is 
property  and  perpetual. — The  case  of  Seattle  v.  Colum- 
bia &  P.  S.  R.  Co.,  6  Wash.  379,  33  Pac.  1048,  de- 
cided in  1893,  seems  to  hold  that  the  franchise  granted 
by  a  municipality  being  property  is  perpetual  unless 
limited  in  the  grant.  The  court,  however,  recog- 
nizes the  possible  necessity  of  the  municipality  exer- 
cising control  in  spite  of  such  franchise  and  suggests 
that  it  may  do  so  by  the  exercise  of  the  right  of  emi- 
nent domain.     In  the  course  of  its  decision  the  court 


241  DURATION    OF    FRANCHISE.  §  1 89 

says:  "The  property  was  the  franchise — the  right  to 
use  the  street  for  the  purpose  of  constructing  and 
operating  tracks  thereon.  ,  .  .  Property  rights  ac- 
quired under  and  by  virtue  of  franchises  thus  granted 
are  perpetual,  unless  otherwise  limited  in  the  grant; 
and  there  was  no  limit  in  this  instance,  and  such  fran- 
chises are  not  void  in  consequence  thereof.  There 
is  no  sound  reason  why  a  municipal  corporation  may 
not  bind  itself  in  this  particular,  as  well  as  an  indi- 
vidual may.  On  the  contrary,  well-recognized  prin- 
ciples of  justice  require  that  it  should  be  so  bound, 
to  the  end  that  property  rights  may  be  made  stable 
and  certain;  and  the  municipality  is  sufficiently  pro- 
tected under  such  circumstances;  for  should  it  become 
necessary  to  thereafter  undo  the  work,  and  terminate 
the  rights  granted,  and  to  take  the  property  of  the 
corporation  acquired  in  pursuance  and  by  virtue  there- 
of, it  may  do  so  under  the  exercise  of  the  power  of 
eminent  domain  upon  making  compensation;  and  this 
is  a  sufficient  protection  for  the  rights  of  the  city, 
and  one  which  at  the  same  time  affords  protection  to 
the  rights  of  the  respondents.  State  v.  Noyes,  47  Me. 
189;  Port  of  Mobile  v.  Louisville  &  N.  R.  Co.,  84 
Ala.  115,  4  South.  Rep.  106." 


16— Pub.  ut. 


CHAPTER  XII. 

FRANCHISE  RIGHTS  AVAILABLE  TO  INHAB- 
ITANTS OF  MUNICIPALITIES. 

Section. 

190.  The  obligation  of  the  municipal  franchise. 

191.  The  duty  imposed  by  acceptance  of  franchise. 

192.  Municipal  public  utilities  affected  with  public  interest. 

193.  Regulation  and  control  of  municipal  public  utilities. 

194.  Municipal  control  in  interest  and  for  benefit  of  public. 

195.  Limitations  imposed  to  conserve  municipal  control. 

196.  Rights  of  inhabitants  the  real  parties  in  interest. 

197.  Individual  inhabitant's  rights. 

198.  Right  of  consumer  failing  to  secure  proper  service. 

199.  Franchise  rights  available  to  individual  customer. 
20C    Nature  of  duty  to  provide  service  defined. 

201.  Customer  may  enjoin  diversion  of  necessary  supply. 

202.  Customer  entitled  to  service  under  most  favorable  conditions. 

203.  Rights  of  abutting  property  owner. 

204.  Liability  of  municipal  public  utility  for  shade  trees. 

205.  Right  of  customer  to  enjoin  collection  of  excessive  rate. 

206.  Regulations  inconsistent  with  franchise  invalid. 

207.  Liability  in  damages  for  failure  to  furnish  adequate  service. 

§  I  go.  The  obligation  of  the  municipal  franchise. 
— ^A  consideration  for  the  granting  of  the  special  fran- 
.chise  rights,  which  permit  of  the  furnishing  of  munic- 
ipal pubHc  utilities  for  municipal  purposes  and  for  the 
use  of  the  inhabitants  of  the  municipality,  is  the  duty, 
thereby  assumed  and  imposed,  of  rendering  proper 
public  utility  service  to  the  municipality  and  its  in- 
habitants. Such  franchise  rights  and  special  privileges 
belong  to  and  may  be  enjoyed  only  by  those  to  whom 
they  are  specially  granted  by  the  state  or  by  its  agent, 
the  municipality,  under  authority  creating  the  agency 
242 


243  FRANCHISE   RIGHTS.  §  IQI 

and   conferring  the   power  to   grant   the   special   fran- 
chise privileges. 

§  191.  The  duty  imposed  by  acceptance  of  fran- 
chise.— This  duty  of  the  municipal  public  utility  to 
serve  the  public  in  accordance  with  the  terms  and 
conditions  of  the  franchise,  granting  it  the  right  to 
furnish  pul)lic  utility  service,  and  the  public  regula- 
tion and  control  which  are  the  means  provided  for 
securing  the  performance  of  the  duty,  due  the  munici- 
pality and  its  inhabitants,  are  imposed  by  virtue  of 
the  principle  which  has  been  established  in  our  juris- 
prudence for  centuries  and  is  clearly  stated  and  ap- 
plied to  our  modern  industrial  conditions  in  the  case  of 
Munn  V.  People  of  Illinois,  94  U.  S.  113,  24  L.  ed.  yj. 
The  old  English  Common  Law  established  as  one  of 
its  first  and  most  fundamental  principles  that  "when 
private  property  is  affected  with  a  public  interest  it 
ceases  to  be  private  only  and  becomes  subject  to  pub- 
lic regulation  and  control."  As  the  court  in  the  Munn 
case  so  well  expressed  it,  "Property  does  become 
clothed  with  a  public  interest  when  used  in  a  manner 
to  make  it  of  public  consequence,  and  affect  the  com- 
munity at  large.  When,  therefore,  one  devotes  his 
property  to  a  use  in  which  the  public  has  an  interest, 
he,  in  effect,  grants  to  the  public  an  interest  in  that 
use,  and  must  submit  to  be  controlled  by  the  public 
for  the  common  good,  to  the  extent  of  the  interest 
he  has  thus  created.  He  may  withdraw  his  grant  by 
discontinuing  the  use;  but,  so  long  as  he  maintains 
the  use,  he  must  submit  to  the  control." 

§  192.  Municipal  public  utilities  affected  with  pub- 
lic interest. — Under  this  principle  which  has  been  es- 
tablished for  the  past  three  centuries,  at  least  since 
the  day  of  Lord  Chief  Justice  Hale,  who  enunciated 
it,  all  public  service  corporations  by  virtue  of  the  fact 


§193  PUBLIC  UTILITIES.  244 

that  they  are  pubHc  rather  than  private  corporations, 
organized  for  the  purpose  of  serving  the  public  in 
that  capacity  and  having  been  granted  the  special 
franchise  privileges  of  doing  so  in  accordance  with 
the  terms  of  the  grant,  have  been  subjected  to  the  con- 
trol and  regulation  of  the  pubhc  in  the  interest  of  the 
public  for  the  purpose  of  securing  to  the  pubhc  the 
performance  of  the  duties  connected  with  rendering 
the  service  undertaken  by  the  incorporation  of  the 
company  and  the  acceptance  of  the  special  franchise 
privileges. 

§  193.  Regulation  and  control  of  municipal  public 
utilities. — The  power  conferred  upon  the  municipality 
of  granting  the  use  of  its  streets  to  the  municipal  pub- 
hc utility  for  the  purpose  of  permitting  it  to  furnish 
its  public  utility  service  and  of  imposing  the  condi- 
tions under  which  the  streets  may  be  used  for  render- 
ing the  service  is  to  secure  proper  municipal  regula- 
tion and  control  of  such  service.  And  when  the  mu- 
nicipal public  utility  receives  its  charter  from  the  state 
granting  it  the  right  to  be  a  body  corporate  and  ac- 
cepts the  special  franchise  rights  conferred  by  the 
municipality  permitting  it  to  own  and  operate  its  pub- 
lic utility  system,  by  virtue  of  the  acceptance  of  such 
special  privileges  and  as  a  consideration  for  them,  the 
municipal  public  utility  undertakes  and  is  in  duty 
bound  to  provide  adequate  service  to  all  of  its  cus- 
tomers; and,  for  the  purpose  of  seeing  that  it  does  so, 
is  subjected  to  regulation  and  control  at  the  hands 
of  the  state  and  by  other  agencies  created  for  that 
purpose,  including  the  municipahty. 

§  194.  Municipal  control  in  interest  and  for  bene- 
fit of  public. — The  franchise  rights  are  granted  not  as 
a  special  privilege  in  the  interest  and  for  the  peculiar 
benefit    of    the    public    service    corporation,    but    such 


245  FRANCHISE    RIGHTS.  §  I95 

rights  are  granted  by  the  public  generally  to  whom 
they  belong  for  the  special  benefit  and  advantage  of 
the  public  and  the  individual  members  composing  it. 
These  special  benefits  conferred  in  the  franchise  grants 
carry  with  them  the  duty  and  burden  of  rendering 
adequate  service  to  the  public  on  reasonable  terms 
and  conditions;  and  one  of  the  chief  duties  of  the 
municipal  authorities  is  to  require  such  service  in  the 
interest  of  the  municipality  and  its  inhabitants.  The 
power  of  regulation  and  control  is  vested  in  them  for 
this  purpose  exclusively,  and  not  for  the  purpose  of 
being  surrendered  or  bartered  away;  and,  that  this 
power  may  be  conserved  in  the  municipality,  the  law 
has  provided  many  checks  and  restrictions,  including 
those  already  discussed,  limiting  the  power  of  the 
municipality  to  incur  only  a  fixed  indebtedness;  to 
make  contracts  and  grant  franchises  only  which  are 
not  exclusive  unless  the  municipality  be  clearly  em- 
powered to  make  them  exclusive,  and  then  only  in 
such  cases  where  it  is  clearly  apparent  that  the  inten- 
tion was  to  make  the  contract  or  franchise  exclusive; 
and  further  to  make  a  contract  or  grant  a  franchise 
only  for  a  reasonable  period  and  not  in  perpetuity 
unless  the  power  and  the  intention  is  clearly  apparent 
that  they  continue  perpetually. 

§  195.  Limitations  imposed  to  conserve  municipal 
control. — Further  restrictions,  to  be  noted  later  in  this 
discussion,  which  are  imposed  for  the  purpose  of 
conserving  the  power  of  regulation  and  control  in  the 
public  and  especially  in  the  municipality  as  the  means 
of  securing  eflficient  service  on  reasonable  terms  are 
the  limitations  placed  on  the  public  service  corpora- 
tion to  assign  its  franchise  rights,  to  lease  or  sell  its 
property,  or  in  any  way  to  hamper  or  disable  itself 
from   performing  its   duty   to   the   public   in   rendering 


§  196  PUBLIC   UTILITIES,  246 

proper  service — all  of  which  are  for  the  purpose  of 
protecting  the  interests  of  the  public  and  its  members 
in  securing  the  performance  of  the  obligations  due  it 
from  the  public  service  corporations. 

§  196.  Rights  of  inhabitants  the  real  parties  in 
interest. — The  rights  thus  created  and  the  consequent 
duties  imposed  on  the  public  service  corporation  are 
generally  available  to  the  inhabitants  of  the  munici- 
pality as  w^ell  as  to  the  municipality  itself;  indeed, 
they  are  the  real  parties  in  interest  for  w^hom  is  made 
the  contract,  which  results  from  the  acceptance  of 
the  franchise  by  the  public  service  corporation.  These 
rights  will  be  enforced  by  the  courts  on  the  petition  of 
the  individual  inhabitant  or  the  municipality  that  is 
denied  adequate  service  on  reasonable  conditions  by 
means  of  a  mandamus  proceeding,  or  by  a  writ  of 
injunction  where  the  service  is  about  to  be  discontin- 
ued. Public  utility  service,  whether  rendered  by  a  pri- 
vate corporation  or  the  municipality  itself,  must  be 
provided  to  all  who  apply  and  are  willing  to  pay  for 
it  under  such  terms  and  conditions  as  may  be  reason- 
ably imposed. 

§  197.  Individual  inhabitant's  rights. — Each  inhab- 
itant, whether  an  owner  or  a  tenant  of  property, 
should  have  the  right  to  contract  for  service  in  his 
own  name  within  reason,  although  naturally  where 
there  are  a  large  number  of  tenants  of  a  transient 
nature  occupying  only  one  or  two  rooms  of  a  large 
building,  a  reasonable  regulation  may  permit  the  com- 
pany to  contract  only  with  the  party  owning  or  con- 
trolling the  entire  structure.  These  are  matters  of 
administration  and  are  determined  by  a  practical  appli- 
cation of  what  is  just  and  reasonable  under  the  circum- 
stances of  the  particular  case  where  an  established 
practice    or    general   custom    is    generally    controlling. 


247  FRANCHISE   RIGHTS.  §  I97 

Where,  however,  the  corporation  providing  the  ser- 
vice receives  an  application  for  its  service  and  the  cus- 
tomer complies  with  the  reasonable  rules  and  regula- 
tions on  his  part  a  contract  results  which  requires  that 
adequate  service  be  rendered  in  accordance  with  the 
prevailing  terms  and  conditions;  and  as  before  sug- 
gested, default  on  the  part  of  the  municipal  public 
utility  gives  a  right  of  action  in  the  form  of  mandamus 
or  injunction,  and  where  special  injury  results  from 
such  failure,  the  party  suffering  the  injury  may  recover 
compensation  in  damages/ 

'ALABAMA. — Birmingham  v.  Birmingham  Water  Co.  (Ala.),  42 
So.   10. 

ARKANSAS.— Danaher  v.  Southwestern  Tel.  &  T.  Co.,  94  Ark. 
533,  127  S.  W.  963;  Carson  v.  Ft.  Smith  Light  &  Traction  Co., 
(Ark.),  158  S.  W.  129. 

FEDERAL.— Postal  Cable  Tel.  Co.  v.  Cumberland  Tel.  &  T.  Co., 
177  Fed.  726. 

GEORGIA.— Freeman  v.  Macon  Gas  Light  &  W.  Co.,  126  Ga.  843, 
56  S.  E.  61,  7  L.  R.  A.  (N.  S.)  917. 

INDIANA.— Coy  v.  Indianapolis  Gas  Co.,  146  Ind.  655,  46  N.  E. 
17,  36  L.  R.  A.  535;  Indiana  Natural  &  Illuminating  Gas  Co.  v.  State 
ex  rel.,  158  Ind.  516,  63  N.  E.  220,  57  L.  R.  A.  761;  Portland  Natural 
Gas  Co.  V.  State  ex  rel.,  135  Ind.  54,  34  N.  E.  818,  21  L.  R.  A.  639; 
State  V.  Consumers'  Gas  Trust  Co.,  157  Ind.  345,  61  N.  E.  674,  55  L. 
R.  A.  245;  Westfield  Gas  &  Milling  Co.  v.  Mendenhall,  142  Ind.  538, 
41  N.  E.  1033. 

KENTUCKY.— Cumberland  Tel.  &  T.  Co.  v.  Cartwright  Creek 
Tel.  Co.,  32  Ky.  L.  1357,  108  S.  W.  875;  Cumberland  Tel.  &  T.  Co.  v. 
Hickman,  129  Ky.  220,  111  S.  W.  311;  Georgetown  v.  Georgetown 
Water,  &c.,  Co.,  134  Ky.  608,  121  S.  W.  428,  24  L.  R.  A.  (N.  S.)  303; 
Marion  Electric  Light,  &c.,  Co.  v.  Rochester,  149  Ky.  810,  149  S.  W. 
977. 

MAINE.— Kimball  v.  Northeast  Harbor  Water  Co.,  107  Maine 
467,  78  Atl.  865.  32  L.  R.  A.  (N.  S.)  805. 

MARYLAND.— Chas.  Simon's  Sons  Co.  v.  Maryland  Tel.  &  T. 
Co.,  99  Md.  141,  57  Atl.  193,  63  L.  R.  A.  727. 

MASSACHUSETTS.- Souther  v.  Gloucester,  187  Mass.  552,  73  N. 
E.  558.  69  L.  R.  A.  309. 

MICHIGAN.— Rice  v.  Detroit,  &c.,  R.,  122  Mich.  677,  81  N.  W. 
927,  48  L.  R.  A.  84. 

MINNESOTA.— State  ex  rel.  W.  J.  Armstrong  Co.  v.  Waseca, 
(Minn.),  142  N.  W.  319;  St.  Paul  Realty  &  Assets  Co.  v.  TrI-Stat© 
T.  &  T.  Co.  (Minn.),  142  N.  W.  807. 


§  198  PUBLIC  UTILITIES.  248 

§  198.  Right  of  consumer  failing  to  secure  proper 
service. — The  general  principle  permitting  recovery 
for  a  failure  to  render  proper  service  by  the  individual 
customer  is  v^ell  expressed  in  the  case  of  Freeman  v. 
Macon  Gas  Light  &  W.  Co.,  126  Ga.  843,  56  S.  E.  61, 
7  L.  R.  A.  (N.  S.)  917,  decided  in  1906,  where  the 
court  says:  "In  the  present  case,  it  affirmatively  ap- 
pears that  the  contract  relied  on  by  the  plaintiff  was 
made  in  pursuance  of  express  authority  conferred  by 
the  legislature  upon  the  municipality  to  grant  a  fran- 
chise upon  certain  terms,  one  of  which  was  that  pri- 
vate consumers  should  be  furnished  water  at  rates 
to  be  fixed  by  the  city  in  the  contract  with  the  Macon 
Gas  Light  &  Water  Company.  The  water  company, 
by  entering  into  the  contract  which  the  general  as- 
sembly authorized  the  city  to  make  with  that  company, 
accepted  the  privilege  of  supplying  the  citizens  of 
that  city,  as  such,  with  water  upon  certain  terms,  and 
became  a  public  service  corporation  with  an  express 
statutory  duty  to  perform.  This  duty  the  company 
owed  to  every  private  consumer  of  water,  independ- 
ently of  any  contract  duty  it  owed  to  the  municipality 
itself,  considered  as  a  municipal  corporation  engaged 
in   the    discharge    of    governmental    functions.      For    a 

MISSOURI.— state  v.  Graeme,  130  Mo.  App.  138,  108  S.  W.  1131. 

MONTANA.— State  ex  rel.  Milsted  v.  Butte  City  Water  Co.,  18 
Mont.  199,  44  Pac.  966,  32  L.  R.  A.  697,  56  Am.  St.  574. 

NEBRASKA.— American  Waterworks  Co.  v.  State,  46  Nebr.  194, 
64  N.  W.  711;  Slabaugli  v.  Omaha  Electric  Light  &  P.  Co.,  87  Nebr. 
805,  128  N.  W.  505,  30  L.  R.  A.  (N.  S.)  1084. 

NEW  JERSEY.— Boonton  v.  Boonton  Water  Co.,  69  N.  J.  Eq. 
23,  61  Atl.  390. 

NEW  YORK.— Pond  v.  New  Rochelle  Water  Co.,  183  N.  Y.  330, 
76  N.  E.  211,  1  L.  R.  A.  (N.  S.)  961;  Rochester  Tel.  Co.  v.  Ross,  195 
N.  Y.  429,  88  N.  E.  793;  Wood  v.  New  York  Interurban  Water  Co., 
142  N.  Y.   S.   626. 

VERMONT.— Bourke  v.  Olcott  Water  Co.,  84  Vt.  121,  78  Atl.  715y- 
33  L.  R.  A.  (N.  S.)  1015. 


249  FRANCHISE   RIGHTS.  §  199 

breach  of  this  statutory  duty,  the  company  could  be 
held  liable  in  tort  by  the  aggrieved  member  of  the 
public,  though  he  was  no  party  to  the  contract  be- 
tween the  city  and  the  water  company." 

§  199.  Franchise  rights  available  to  individual  cus- 
tomer.— That  the  contract  resulting  from  the  accept- 
ance of  the  franchise  granted  by  the  municipality 
creates  rights  which  become  available  to  the  individ- 
ual customer  receiving  such  service  who  may  insist  on 
the  service  being  rendered  in  accordance  with  the 
rights  thus  fixed  and  determined  is  the  effect  of  the 
decision  in  the  case  of  Westfield  Gas  &  Milling  Co.  v. 
Mendenhall,  142  Ind.  538,  41  N.  E.  1033,  decided  in 
1895,  as  follows:  "By  an  act  of  the  legislature  ap- 
proved March  7,  1887  (Acts  1887,  p.  36;  Rev.  St.  1894, 
§  4306),  incorporated  towns  and  cities  are  empowered 
to  enact  a  general  ordinance  to  reasonably  regulate  the 
supply,  distribution,  and  consumption  of  natural  gas 
within  their  respective  corporate  limits,  and  to  require 
a  fee  of  the  persons  or  companies  for  the  use  of  the 
streets     granted     to     them     by     these     municipalities. 

.  .  The  town  had  the  right,  in  granting  the  use 
of  its  streets,  to  impose  such  reasonable  requirements, 
terms,  regulations,  and  conditions  therein  upon  those 
accepting  the  privileges  and  benefits  of  the  grant  as 
its  own  prudence  and  discretion  might  dictate,  so  as 
not  to  restrict,  however,  the  town  in  its  legitimate  ex- 
ercise of  legislative  powers.  The  authority  to  pre- 
scribe such  terms  and  conditions,  if  not  expressly 
conferred  by  the  act  of  1887,  ^nay  at  least  be  reason- 
ably inferred  therefrom,  in  order  that  the  full  force 
and  effect  may  be  given  to  the  power  expressly 
granted.  Crawfordsville  v.  Braden,  130  Ind.  149,  28 
N.  E.  849;  Indianapolis  v.  Consumers'  Gas  Trust  Co., 
140    Ind.    107,    39    N.    E.    433,    and    authorities    there 


§  200  PUBLIC  UTILITIES.  25O 

cited.  .  .  .  Having  accepted  the  franchise  granted 
by  the  ordinance,  and  agreed  to  be  bound  by  the  ex- 
press terms  as  to  the  price  of  gas,  and  having  engaged 
in  the  exercise  of  the  privileges  under  the  grant,  and 
so  continuing  to  do,  it  is  now  precluded  from  suc- 
cessfully refusing  to  discharge  its  obligations  to  the 
inhabitants  of  the  town  who  desire  to  use  its  fuel 
upon  the  ground  that  they  refuse  to  pay  a  price  there- 
for in  excess  of  the  maximum  rate  fixed  by  the  ordi- 
nance. The  town  could  not,  by  its  subsequent  action, 
impair  or  restrict  the  rights  granted  to,  accepted,  and 
exercised  by  appellant.  Neither  will  the  latter  be 
permitted,  under  the  circumstances,  to  decline  to  com- 
ply with  the  terms  or  conditions  assumed,  by  which 
it  is  expressly  obligated." 

This  principle  is  well  stated  in  the  case  of  Cumber- 
land Tel.  &  T.  Co.  V.  Hickman,  129  Ky.  220,  iii  S.  W. 
311,  decided  in  1908,  where  in  holding  that  having 
accepted  the  contract  and  enjoyed  the  privileges 
granted  by  the  franchise  the  company  will  not  be 
permitted  to  repudiate  any  of  its  terms,  the  court  said: 
"In  this  case,  a  part  of  the  consideration  for  the  grant 
of  the  franchise,  there  is  a  contract  of  the  grantee  to 
furnish  certain  classes  of  persons  certain  valuable  priv- 
ileges. The  contract  was  made  for  their  benefit,  and 
based  upon  a  valuable  consideration.  They  may  sue 
in  their  behalf,  and  one  or  more  may  sue  for  all,  or  the 
city  might  have  maintained  the  suit,  as  it  was  the 
party  with  whom  the  contract  was  made." 

§  200.     Nature  of  duty  to  provide  service  defined. 

— By  way  of  defining  the  nature  of  the  public  utility 
service  which  the  company  is  obliged  to  render  under 
its  franchise,  the  court  in  the  case  of  Kimball  v.  North- 
east Harbor  Water  Co.,  107  Maine  467,  78  Atl.  865,  32 
L.  R.  A.  (N.  S.)  805,  decided  in  191 1,  in  holding  that 


251  FRANCHISE   RIGHTS.  §  201 

the  use  of  water  for  operating-  an  elevator  in  a  hotel 
was  a  "domestic  purpose"  and  that  the  company  was 
accordingly  bound  to  furnish  service  for  that  use,  said: 
"It  is  not  the  manner  of  the  use,  but  its  purpose,  which 
is  the  determining  test.  Is  it  to  be  used  for  the  neces- 
sity, cleanliness,  health,  comfort  or  convenience  of  the 
house  and  its  appurtenances  or  of  the  household?  If 
so,  it  is  a  domestic  purpose.  And  it  can  make  no 
difference  whether  it  be  a  private  home  or  a  hotel, 
which  in  this  sense  is  but  a  large  household,  a  tem- 
porary home  for  a  greater  number  of  people.  An  ele- 
vator in  a  private  house  is  a  convenience;  in  a  hotel  is 
almost,  if  not  quite,  a  necessity.  It  promotes  the 
personal  comfort  of  the  proprietor,  his  family,  servants 
and  guests.  It  is  a  domestic  labor-saving  device,  and 
the  use  of  water  in  propelling  such  elevator  would  cer- 
tainly seem  to  be  embraced  in  the  term  'domestic'  " 

§  201.  Customer  may  enjoin  diversion  of  necessary 
supply. — By  way  of  a  further  definition  of  the  nature 
of  the  service  to  which  the  customer  is  entitled  and 
as  a  practical  application  of  the  principle  permitting 
him  to  enjoin  action  on  the  part  of  the  public  service 
corporation  which  would  have  the  effect  of  interfering 
with  the  service  it  is  bound  to  render,  the  case  of 
Boonton  v.  Boonton  Water  Co.,  69  N.  J.  Eq.  23,  61 
Atl.  390,  decided  in  1904,  holds  that  such  a  customer 
may  enjoin  the  company  from  furnishing  water  for 
the  supply  of  railway  locomotives  and  for  the  genera- 
tion of  motive  power  because  such  use  would  disable 
the  company  from  furnishing  an  adequate  supply  for 
domestic  and  other  purposes  for  which  the  plant  was 
established  and  the  franchise  granted.  Although  the 
court  indicated  that  if  a  supply  adequate  for  both 
domestic  purposes  and  for  the  creation  of  motor  power 
and  for  locomotives  could  be  secured  it  would  not  en- 


§  202  PUBLIC  UTILITIES.  252 

join  the  company  from  furnishing  its  service  for  the 
other  purposes  because  in  that  event  it  would  not  inter- 
fere w^ith  the  furnishing  of  adequate  service  for  the 
former  purpose.  In  the  course  of  its  decision  the 
court  observed:  "In  short,  I  think  the  words  'business 
and  factory  use'  are  confined  to  domestic  uses  as  found 
in  factories  and  places  of  business,  namely,  drinking, 
washing,  flushing  waterclosets,  and  the  like.  It  would 
be  quite  impracticable  to  make  a  list,  and  annex  it  to 
the  contract,  of  all  the  different  kinds  of  factories  and 
places  of  business  that  might  need  water,  and  I  am 
therefore  of  the  opinion  that  those  expressions  do 
not  help  the  defendant,  and  that  the  defendant  has  no 
right  to  use  any  of  its  water  for  the  supply  of  the 
engines  of  the  railway  company  or  the  motors  that 
drive  the  printing  presses,  or  the  ventilating  fans,  or 
"•ny  other  mechanical  purposes,  or  the  washing  of 
hats — I  had  some  doubts  of  that  at  first,  but  reflection 
has  removed  it — so  long  as  there  shall  be  any  deficiency 
of  water  in  the  higher  parts  of  the  town." 

The  decision  in  the  case  of  Chas.  Simon's  Sons  Co. 
v.  Maryland  Tel.  &  T.  Co.,  99  Md.  141,  57  Atl.  193, 
63  L.  R.  A.  "^2.^,  decided  in  1904,  observes  with  pro- 
priety that  "It  can  not  be  here  objected  by  the  ap- 
pellee that  the  regulation  contained  in  the  ordinance 
here  in  question  as  to  rates  of  charge  was  not  a  rea- 
sonable one.  The  time  to  have  urged  such  a  consid- 
eration was  before  it  accepted  the  ordinance  and 
availed  of  the  privileges  it  acquired  thereunder." 

§  202.  Customer  entitled  to  service  under  most 
favorable  conditions. — An  interesting  practical  illustra- 
tion of  the  right  of  the  customer  to  receive  service 
under  the  most  favorable  conditions  provided  for  in  the 
franchise  is  furnished  by  the  case  of  Rice  v.  Detroit, 
&c.,  R.,  122  Mich.  677,  81  N.  W.  927,  48  L.  R.  A.  84, 


253  FRANCHISE   RIGHTS.  §  203 

decided  in  1900,  where  the  conductor  in  charge  of 
defendant's  car,  not  having  a  supply  of  tickets,  exacted 
a  larger  cash  fare  than  the  price  of  the  ticket  of  which 
the  court  said:  "We  have,  then,  a  case  in  which  de- 
fendant is  operating  under  a  franchise  imposing  a  duty 
to  sell  five  tickets  for  fifty  cents,  good  between  the 
city  hall,  Detroit,  and  any  point  in  the  village  of 
Dearborn.  The  franchise  further  provided,  'AH  such 
tickets  shall  be  kept  for  sale  upon  each  and  every  car 
operated  by  it.'  .  .  .  The  franchise  is  in  the  nature 
of  a  contract,  and  imposes  obligations  upon  the  com- 
pany which  those  having  occasion  to  ride  from  Dear- 
born to  Detroit  have  a  right  to  enforce." 

§  203.     Rights   of   abutting   property   owner. — The 

right  of  the  abutting  property  owner  to  recover  dam- 
ages for  the  removal  of  shade  trees  by  a  public  utility 
providing  telephone  service  is  determined  by  the  case 
of  State  V.  Graeme,  130  Mo.  App.  138,  108  S.  W.  113 1, 
decided  in  1908,  which  in  accordance  with  the  general 
rule  holds  that  the  public  utility  as  well  as  the  public 
generally  only  enjoy  an  easement  in  the  use  of  the 
street  for  the  purpose  of  transportation  and  com- 
munication but  that  the  title  and  the  right  to  use  and 
enjoy  the  property  subject  to  this  easement  belongs 
to  the  abutting  property  owner  which  permits  him 
to  maintain  shade  trees,  for  as  the  court  said:  "The 
telephone  company  occupied  the  street  as  a  mere 
licensee.  Watson,  the  owner  of  the  abutting  lot, 
owned  the  fee  to  the  center  of  the  street,  subject  to 
the  easement  of  the  town  of  Republic,  and  had  a  right 
to  plant  the  trees  inside  the  curb  line  and  thus  occupy 
the  street  jointly  with  the  town,  subject,  of  course,  to 
the  right  of  the  town  to  remove  the  trees  should  they 
incommode  the  public  in  the  use  of  the  street.  The 
right  of  the   telephone   company  to  occupy  the   street 


§  204  PUBLIC  UTILITIES.  254 

with  its  poles  and  wires  was  therefore  subordinate  to 
the  right  of  Watson,  the  property  owner  to  have  the 
trees  in  the  street;  that  is,  if  to  construct  or  maintain 
its  line  the  telephone  company  should  be  obliged  to 
remove  or  damage  the  trees,  it  would  be  bound  to 
respond  to  Watson  in  damages." 

§  204.  Liability  of  municipal  public  utility  for 
shade  trees. — The  liability  of  a  public  utility  company 
to  pay  for  the  loss  resulting  from  the  trimming  of 
shade  trees  although  authority  to  trim  them  where 
necessary  had  been  granted  is  defined  in  the  case  of 
Slabaugh  v.  Omaha  Electric  Light  &  P.  Co.,  87  Nebr. 
805,  128  N.  W.  505,  30  L.  R.  A.  (N.  S.)  1084,  decided 
in  1910,  where  the  court  says:  "The  city  of  Omaha 
holds  title  to  its  streets  and  alleys  in  trust  for  the  bene- 
fit of  the  public.  Jaynes  v.  Omaha  Street  R.  Co.,  53 
Nebr.  631,  39  L.  R.  A.  751,  74  N.  W.  67.  The  city 
council  had  authority  to  grant  the  defendant's  assignor 
a  right  of  way  over  the  streets  and  alleys  in  the  city 
for  the  construction  and  maintenance  of  the  poles  and 
wires  in  question;  and  the  use  of  those  streets  for  that 
purpose  is  a  public  use.  Plattsmouth  v.  Nebraska 
Teleph.  Co.,  80  Nebr.  460,  14  L.  R.  A.  (N.  S.)  654, 
127  Am.  St.  R.  779,  114  N.  W.  588.  If  the  defendant 
had  the  right  under  its  franchise  to  trim  the  plaintiff's 
trees,  but  in  the  exercise  of  that  authority  it  damaged 
her  property,  it  should  respond  in  damages  under  sec- 
tion 21  of  article  i  of  the  constitution,  which  reads: 
'The  property  of  no  person  shall  be  taken  or  damaged 
for  public   use   without   just   compensation   therefor.'  " 

§  205.  Right  of  customer  to  enjoin  collection  of 
excessive  rate. — The  case  of  Pond  v.  New  Rochelle 
Water  Co.,  183  N.  Y.  330,  76  N.  E.  211,  i  L.  R.  A. 
(N.  S.)  961,  decided  in  1906,  furnishes  a  recent  state- 


255  FRANCHISE    RIGHTS.  §  206 

ment  of  the  principle  defining  the  rights  of  customers 
to  receive  service  strictly  in  accordance  with  the  terms 
and  conditions  provided  in  the  franchise.  In  this 
decision  the  court  used  the  following  language:  "The 
plaintiff,  a  resident  of  the  village  of  Pelham  Manor, 
Westchester  county,  and  a  customer  of  the  defendant 
water  company  furnishing  the  village  with  its  supply 
of  water,  seeks  in  this  action  a  permanent  injunction 
restraining  the  company  from  enforcing  collection  of 
a  water  rate  in  excess  of  the  amount  fixed  by  the 
existing  contract  with  the  village.  ...  In  the 
case  before  us  we  have  a  municipality  entering  into  a 
contract  for  the  benefit  of  its  inhabitants,  the  object 
being  to  supply  them  with  pure  and  wholesome  water 
at  reasonable  rates.  ...  In  the  case  before  us 
the  municipality  sought  to  protect  its  inhabitants,  who 
were  at  the  time  of  the  execution  of  the  contract 
consumers  of  water,  and  those  who  might  thereafter 
become  so,  from  extortion  by  a  corporation  having 
granted  to  it  a  valuable  franchise  extending  over  a 
long  period  of  time.  We  are  of  opinion  that  the  com- 
plaint states  a  good  cause  of  action." 

§  206.  Regulations  inconsistent  with  franchise  in- 
valid.— That  the  rights  as  defined  in  the  franchise  can 
not  be  modified  by  the  by-laws  of  the  public  service 
corporation,  and  that  so  far  as  such  by-laws  are  incon- 
sistent with  the  provisions  of  the  franchise  they  will 
be  held  void  and  of  no  effect  is  well  expressed  in  the 
decision  of  the  case  of  Bourke  v.  Olcott  Water  Co., 
84  Vt.  121,  78  Atl.  715,  33  L.  R.  A.  (N.  S.)  1015, 
decided  in  1911,  where  the  right  of  the  tenant  to  con- 
tract in  his  own  name  for  the  service  was  upheld  in 
the  face  of  a  rule  of  the  company  providing  that  all 
bills  for  its  service  must  be  paid  by  the  owner  of  the 
premises,  for  as  the  court  says:     "By  section  13  of  the 


§  207  PUBLIC  UTILITIES.  256 

company's  charter  it  is  provided  that  'every  person' 
living  w^ithin  the  territorial  limits  of  the  village  of 
Wilder  'shall  be  entitled  to  have  and  use  an  ample 
supply  of  water  from  the  mains  of  said  company,  by 
paying  a  reasonable  compensation  therefor.'  .  .  . 
It  is  insisted  on  the  part  of  the  orators,  however,  that 
this  rule  is  not  only  unreasonable,  but  repugnant  to 
the  charter  provision  just  quoted.  We  need  not  stop 
to  consider  whether  the  rule  is  reasonable  or  other- 
wise, for  we  deem  it  to  be  in  manifest  conflict  with 
this  provision  of  the  charter,  and  it  follows  that  it 
can  not  be  enforced.  The  comprehensive  language 
used  plainly  indicates  an  intention  on  the  part  of  the 
legislature  to  require  the  company  to  supply  all  who 
called  for  water,  provided  they  paid." 

§  207.  Liability  in  damages  for  failure  to  furnish 
adequate  service. — The  public  service  corporation,  in 
failing  or  refusing  to  furnish  adequate  service  to  a 
customer  in  accordance  with  the  contract  for  such 
service  and  under  the  duty  imposed  in  the  franchise 
granting  it  the  privilege  to  render  the  service,  is  liable 
in  damages  for  an  injury  to  such  a  customer  resulting 
from  such  breach  of  contract  or  failure  to  perform 
such  duties.  In  recognizing  that  a  public  service  cor- 
poration occupying  the  streets  of  the  municipality 
by  virtue  of  a  franchise  granted  for  that  purpose  may 
not  at  its  pleasure  give  or  withdraw  the  service  at  its 
disposal  which  may  be  necessary  for  the  comfort, 
health  and  even  Hfe  of  the  inhabitants,  but  that  it 
must  render  such  service  impartially,  the  court  in  the 
case  of  Coy  v.  IndianapoHs  Gas  Co.,  146  Ind.  655,  46 
N.  E.  17,  36  L.  R.  A.  535,  decided  in  1897,  holds  the 
public  service  corporation  liable  in  damages  for  the 
death  of  a  customer's  children  which  resulted  directly 
from  its  failure  to  supply  the  natural  gas  required  to 


257  FRANCHISE    RIGHTS.  §  20/ 

provide  the  necessary  heat  for  his  home,  for  as  the 
court  said:  "The  agreement  so  entered  into  did  not  in 
any  manner  absolve  appellee  from  the  duty  assumed 
under  its  franchise,  but  rather,  by  its  terms,  fixed  the 
character  and  scope  of  the  duty  so  assumed.  Even 
without  and  before  the  contract,  it  was  the  duty  of  the 
company  to  attach  its  mains  to  appellant's  house  pipe, 
on  being  requested  to  do  so  by  him,  and  on  his  com- 
pliance with  the  reasonable  conditions  imposed  by  the 
company.  Nor  would  it  be  enough  to  make  such 
connections  without  also  supplying  the  gas  therefor. 
.  .  .  The  failure  of  duty  on  the  part  of  the  com- 
pany, as  alleged  in  the  complaint,  is  a  tort,  even 
though  the  complaint  also  shows  a  failure  to  comply 
with  the  contract.  The  contract  was  but  a  statement 
of  the  reasonable  conditions  under  which  the  company 
was  required  to  perform  its  duty.  The  authorities 
show  that  in  such  a  case  the  action  may  be  on  con- 
tract or  in  tort,  the  necessary  statement  of  facts  being 
substantially  the  same  in  either  case.  The  failure  to 
perform  such  a  contract  is  in  itself  a  tort.  The  action 
in  this  case  is  therefore  in  tort." 


17— Pub.  ut. 


CHAPTER  XIII. 

NO    DISCRIMINATION    IN    SERVICE. 

Section. 

208.  Impartial  service  the  measure  of  the  obligation. 

209.  Municipal  public  utilities  natural  monopolies. 

210.  Requirement  of  uniform  service  takes  the  place  of  competition. 

211.  Enforcement   of  rights   by   individual   customer   impracticable. 

212.  Public  regulation  and  control  of  business  of  public  nature. 

213.  Discrimination  based  on  reasonable  classification. 

214.  Individual  may  enforce  uniform  telephone  service. 

215.  Municipal  public  utility   must   serve  public   granting   it   fran- 

chise. 

216.  Uniform  service  to  all  of  class  and  of  similar  classes. 

217.  Contract  for  exclusive  telephone  service  invalid. 

218.  Value  of  service  to  customer  no  valid  basis  for  rate  classifi- 

cation. 

219.  Reasonable  regulations  for  securing  payment  for  service. 

220.  Discontinuing  service  for  nonpayment. 

221.  Discrimination   by   rebates  illegal. 

222.  Rates  for  service  not  taxes  need  not  be  uniform  under  con- 

stitution. 

223.  Discrimination  in  favor  of  public  or  charity. 

224.  Inadequate  supply  no  justification  for  discrimination. 

225.  Rule  necessary  to  protect  poorer  classes  especially. 

226.  Suburban  customer  may  be  classified  as  such. 

227.  Quantity  of  service  as  basis  of  classification. 

228.  Classification  between  old  and  new  subscribers  invalid. 

229.  Nature  of  use  of  gas  service  not  proper  basis  of  classification. 

§  2o8.  Impartial  service  the  measure  of  the  obli- 
gation.— That  there  shall  be  no  discrimination  in  the 
municipal  public  utility  service  furnished  by  the  cor- 
poration enjoying  the  special  privilege  of  rendering 
such  service  is  a  vrell  estabhshed  principle,  the  rigid 
enforcement  of  which  in  practice  is  essentially  neces- 
sary to  secure  adequate  service  for  all  under  reason- 
able terms  and  conditions,  which  belongs  as  of  right  to 
all  the  inhabitants  of  the  municipality  as  well  as  to  the 
258 


259  NO    DISCRIxMINATION    IN    SERVICE.  §  209 

municipality  itself.  Impartial  service  to  all  customers 
similarly  situated  is  the  measure  and  means  of  secur- 
ing them  in  their  franchise  rights,  which,  as  already 
shown,  belong  to  the  individual  inhabitant  of  the 
municipality  by  virtue  of  the  municipal  public  utility 
having  accepted  the  franchise,  the  obligation  of  which 
to  the  municipality  and  its  inhabitants  constitutes  the 
consideration  for  the  special  privileges  granted  in 
the  franchise  to  the  corporation  permitting  it  to  fur- 
nish municipal  public  utility  service. 

§  209.  Municipal  public  utilities  natural  monopo- 
lies.— Because  of  the  very  nature  of  the  service  ren- 
dered each  customer  can  not  provide  it  for  himself, 
nor  purchase  it  independently  of  the  others,  nor  from 
whom  he  pleases  or  with  whom  he  might  prefer  to 
deal.  The  distribution  of  the  municipal  public  utility 
service  must  necessarily  be  made  from  a  single  source, 
or  at  the  most  a  very  few  sources.  While  a  person 
desiring  to  purchase  his  fuel  supply  in  the  form  of 
coal  or  wood  may  generally  deal  with  any  one  of  a 
number  of  independent  concerns  engaged  in  that  line 
of  business,  the  prospective  customer,  desiring  heat 
or  light  in  the  form  of  gas  or  electricity,  or  practically 
any  municipal  public  utility  service,  including  water, 
transportation,  and  communication,  is  limited  in  his 
purchase  to  a  single  market;  and  this  must  be  so 
because  of  the  nature  of  the  manufacture  and  dis- 
tribution as  well  as  the  extent  of  the  investment 
necessary  to  provide  any  municipal  public  utility  ser- 
vice. In  other  words,  the  furnishing  of  municipal 
public  utility  service  is  a  natural  monopoly  which  is 
never  accompanied  by  competitive  conditions  in  theory 
and  seldom  so  in  practice;  because  the  extent  of  the 
investment  necessary  to  provide  such  service  is  so 
great  and  the  occupation  of  the  streets  in  some  cases 


§  2IO  PUBLIC    UTILITIES.  260 

is  necessarily  so  exclusive  that  only  a  single  source  of 
supply  is  available,  and  this  from  the  economic  point 
of  view  should  always  be  the  case. 

§  210.  Requirement  of  uniform  service  takes  the 
place  of  competition. — Since,  therefore,  there  is  gen- 
erally no  control  from  the  force  of  competition  as  all 
customers  are  obliged  to  secure  their  supply  from  a 
common  source,  the  regulation  and  control  which  ex- 
perience has  shown  is  always  necessary  to  secure 
uniformly  adequate  service  on  reasonable  conditions 
require  the  strict  enforcement  of  the  rule  prohibiting 
discrimination  between  customers  similarly  situated  in 
the  common  interest  of  all  parties  concerned  including 
the  corporation  providing  the  service  itself.  For  it  is 
apparent  that  any  special  concession  which  the  cor- 
poration makes  necessarily  reduces  its  revenue  to 
that  extent,  which  loss  must  either  be  borne  by  the 
company  itself  or  by  other  customers  in  receiving 
less  satisfactory  service  or  service  on  less  favorable 
terms. 

§211.  Enforcement  of  rights  by  individual  cus- 
tomer impracticable. — While  the  authorities,  to  be 
noted  and  discussed,  establishing  this  principle  and  de- 
fining what  constitutes  illegal  discrimination  and  in 
what  cases  discrimination  is  permitted  because  condi- 
tions are  different,  hold  that  the  individual  customer 
may  enforce  this  right  in  cases  of  discrimination 
against  him,  it  is  apparent  that  the  expense  and  effort 
necessary  to  secure  his  rights  in  this  way  in  many 
cases  are  prohibitive  and  in  others  the  delay,  pending 
the  enforcement  of  the  right  by  legal  action,  neces- 
sarily causes  great  inconvenience.  Experience  has 
accordingly  demonstrated  the  desirability  of  the  public 
securing  these  rights  to  the  individual  customer  and 
itself   through   administrative   action   by   the    state   or 


26l  NO    DISCRIMINATION    IN    SERVICE.  §  212 

the  municipal  authorities  or  by  some  agency  created 
by  the  state  for  that  purpose,  all  of  which  will  be  dis- 
cussed at  length  later. 

§  212.  Public  regulation  and  control  of  business 
of  public  nature. — The  rule  prohibiting  discrimination 
in  service  which  was  recognized  and  enforced  by  the 
common  law,  and  now  universally  by  statutory  enact- 
ments, provides  that  persons,  either  natural  or  cor- 
porate, which  are  engaged  in  conducting  a  business 
which  is  public  in  its  character  or  impressed  with  a 
public  interest,  or  which  is  monopolistic  in  its  nature, 
can  not  arbitrarily  select  their  patrons  or  distinguish 
in  the  service  they  render  them;  but  that  they  must 
serve  impartially  and  on  equal  terms  and  conditions 
all  persons  without  discrimination.  The  duty  of  the 
public  service  corporation  toward  the  customer  and 
that  of  the  customer  toward  the  corporation  is  recipro- 
cal, and  the  rules  and  regulations  defining  their  re- 
spective rights  and  obligations  must  be  reasonable  and 
just  to  both  parties;  and  the  service  must  be  rendered 
without  discrimination  or  partiality. 

§  213.  Discrimination  based  on  reasonable  classi- 
fication.— Where  the  location  of  the  prospective  cus- 
tomer is  unusual  and  the  conditions  of  furnishing  him 
service  peculiar  because  of  the  distance  he  is  removed 
from  the  center  or  thickly  populated  district  of  the 
municipality  and  because  of  the  sparsely  settled  condi- 
tion of  his  own  neighborhood,  it  is  only  reasonable 
that  the  public  service  corporation,  providing  him  with 
its  service,  be  permitted  to  impose  other  and  difTerent 
conditions  from  those  applicable  to  a  customer  cen- 
trally located  in  the  thickly  populated  district  of  the 
municipality.  There  can  be  no  absolute  right  to  be 
supplied  with  the  conveniences  of  municipal  public 
utilities  for  the  service  furnished  is  necessarily  limited 


§213  PUBLIC    UTILITIES.  262 

to  the  ordinary  uses  for  which  it  is  adopted  and  to 
the  locaHty  where  it  is  offered.  And  while  the  public 
service  corporation  can  not  act  arbitrarily  or  discrimi- 
nate among  its  customers,  present  or  prospective, 
where  similarly  situated,  by  way  of  favoring  one  cus- 
tomer of  a  class  or  one  class  over  others,  a  distinction 
may  be  made  between  different  customers  or  classes 
of  customers  on  account  of  location,  amount  of  con- 
sumption, or  such  other  material  conditions  which  dis- 
tinguish them  from  each  other  or  from  other  classes. 
The  extension  of  the  service  with  the  growth  of  the 
municipality  and  as  a  means  of  encouraging  its  growth, 
however,  is  a  matter  of  special  importance  and  peculiar 
interest  to  the  public,  and  should  be,  and  usually  is, 
expressly  provided  for  in  the  franchise.^ 

'ALABAJVIA. — Birmingham  v.  Birmingham  W.  Co.  (Ala.), 
42  So.  10;  Mobile  v.  Bienville  Water  Supply  Co.,  130  Ala.  379,  30 
So.  445;  Montgomery  Light  &  P.  Co.  v.  Watts,  165  Ala.  370,  51  So. 
725,  26  L.  R.  A.  (N.  S.)  1109;  State  ex  rel.  Ferguson  v.  Birmingham 
Waterworks  Co.,  164  Ala.,  586,  51  So.  354,  27  L.  R.  A.  (N.  S.)  674; 
Montgomery  v.  Greene     (Ala.),  60  So.  900. 

ARKANSAS.— Danaher  v.  Southwestern  Tel.  &  T.  Co.,  94  Ark. 
533,  127  S.  W.  963;  Yancey  v.  Batesville  Tel.  Co.,  81  Ark.  486,  99 
S.  W.  679. 

CALIFORNIA.— Thompson  v.  San  Francisco  Gas  &  Electric  Co., 

18  Cal".  App.  30,  121  Pac.  937. 

FEDERAL.— Missouri  v.  Bell  Tel.  Co.,  23  Fed.  539,  127  U.  S.  780, 
32  L.  ed.  328;  Postal  Cable  Tel.  Co.  v.  Cumberland  Tel.  &  T.  Co., 
177  Fed.  726. 

FLORIDA.— Wilson  v.  Tallahassee  Waterworks  Co.,  47  Fla.  351, 
36  So.  63. 

IDAHO.— Hatch  v.  Consumers'  Co.,  17  Idaho  204,  104  Pac.  670, 
40  L.  R.  A.  (N.  S.)  263. 

ILLINOIS.— Danville  v.  Danville  Water  Co.,  180  111.  235,  54  N. 
E.  224;  Snell  v.  Clinton  Electric  Light,  Heat  &  Power  Co.,  196  111. 
626,  63  N.  E.  1082,  58  L.  R.  A.  284,  89  Am.  St.  341;  Wagner  v.  Rock 
Island,  146  111.  139,  34  N.  E.  545,  21  L.  R.  A.  519. 

INDIANA.— Central  Union  Tel.  Co.  v.  Fehring,  146  Ind.  189, 
45  N.  E.  64;   Central  Union  Tel.  Co.  v.  State  ex  rel.,  118  Ind.  194, 

19  N.  E.  604,  10  Am.  St.  114;  Indiana  Natural  &  Illuminating  Gas 
Co.  v.  Anthony,  26   Ind.  App.   307,  58  N.   E.   868;    Indiana  Natural 


263  NO    DISCRIMINATION    IN    SERVICE.  §214 

§  214.  Individual  may  enforce  uniform  telephone 
service. — In  sustaining  an  action  of  mandamus  brought 
by  an  inhabitant  to  secure  telephone  service  at  the  rate 
fixed  by  the  statute,  the  court  in  the  case  of  Central 
Union  Tel.  Co.  v.  State  ex  rel.,  ii8  Ind.  194,  19  N.  E. 

&  Illuminating  Gas  Co.  v.  State  ex  rel.  Ball,  158  Ind.  516,  63  N.  E. 
220,  57  L.  R.  A.  761;  Irvin  v.  Rushville  Co-Operative  Tel.  Co.,  161 
Ind.  524,  69  N.  E.  258;  Logansport  &  W.  V.  Gas  Co.  v.  Ott,  30  Ind. 
App.  93,  65  N.  E.  549;  Mooreland  Rural  Tel.  Co.  v.  Mouch,  48  Ind. 
App.  521,  96  N.  E.  193;  Richmond  Natural  Gas.  Co.  v.  Clawson,  155 
Ind.  659,  58  N.  E.  1049,  51  L.  R.  A.  744;  State  v.  Consumers'  Gas 
Trust  Co.,  157  Ind.  345,  61  N.  E.  674,  55  L.  R.  A.  245;  State  ex  rel. 
Snyder  v.  Portland  Natural  Gas  &  Oil  Co.,  153  Ind.  483,  53  N.  E. 
1089,  74  Am.  St.  314. 

IOWA.— Huffman  v.  Marcy  Mut.  Tel.  Co.,  143  Iowa  590,  121  N.  W. 
1033,  23  L.  R.  A.  (N.  S.)  1010. 

KANSAS.— Atchison  St.  R.  Co.  v.  Nave,  38  Kans.  744,  17  Pac.  587. 

MASSACHUSETTS.— Souther  v.  Gloucester,  187  Mass.  552,  73  N. 
E.  558,  69  L.  R.  A.  309. 

MICHIGAN.— Boerth  v.  Detroit  City  Gas  Co.,  152  Mich.  654,  116 
N.  W.  628,  18  L.  R.  A.  (N.  S.)  1197;  Bradford  v.  Citizens'  Tel.  Co., 
161  Mich.  385,  126  N.  W.  444;  Preston  v.  Board  of  Water  Comrs.,  117 
Mich.  589,  76  N.  W.  92;  Williams  v.  Mutual  Gas  Co.,  52  Mich.  499, 
18  N.  W.  236,  50  Am.  Rep.  266. 

MINNESOTA.— Gordon  v.  Doran,  100  Minn.  343,  111  N.  W.  272, 
8  L.  R.  A.  (N.  S.)  1049;  Powell  v.  Duluth,  92  Minn.  53,  97  N.  W.  450; 
State  ex  rel.  Latshaw  v.  Board  of  Water  &  Light  Comrs.,  105  Minn. 
472,  117  N.  W.  827,  127  Am.  St.  581;  State  ex  rel.  Mason  v.  Con- 
sumers' Power  Co.,  119  Minn.  225,  137  N.  W.  1104,  State  ex  rel.  City 
of  St.  Paul  V.  St.  Paul  City  Ry.  Co.  (Minn.),  142  N.  W.  136;  State 
ex  rel.  W.  J.  Armstrong  Co.  v.  Waseca  (Minn.),  142  N.  W.  319. 

MISSOURI.— St.  Louis  Brewing  Assn.  v.  St.  Louis,  140  Mo.  419, 
37  S.  W.  525,  41  S.  W.  911;  Vanderberg  v.  Kansas  City,  Mo.,  Gas. 
Co.,  126  Mo.  App.  600,  105  S.  W.  17. 

NEBRASKA.— American  Waterworks  Co.  v.  State,  46  Nebr.  194, 
64  N.  W.  711,  30  L.  R.  A.  447,  50  Am.  St.  610;  Nebraska  Tel.  Co.  v. 
State,  55  Nebr.  627,  76  N.  W.  171,  45  L.  R.  A.  113;  State  v.  Nebraska 
Tel.  Co.,  17  Nebr.  126,  22  N.  W.  237,  52  Am.  Rep.  404. 

NEW  JERSEY.— Washington  v.  Washington  Water  Co.,  70  N. 
J.  Eq.  254,  62  Atl.  390. 

NEW  YORK.— Armour  Packing  Co.  v.  Edison  Electric  Ilium. 
Co.,  100  N.  Y.  S.  605;  Graver  v.  Edison  Electric  Illuminating  Co., 
126  App.  Div.  371,  110  N.  Y.  S.  603;  New  York  Tel.  Co.  v.  Siegel- 
Cooper  Co.,  202  N.  Y.   502,  96  N.  E.   109,  36  L.   R.  A.   (N.   S.)   560; 


§  214  PUBLIC    UTILITIES.  264 

604,  10  Am.  St.  114,  decided  in  1889,  expressed  this 
principle  in  the  following  language :  "It  has  been  held 
universally  by  the  courts,  considering  its  use  and  pur- 
pose, to  be  an  instrument  of  commerce  and  a  common 
carrier  of  news,  the  same  as  the  telegraph,  and  by 
reason  of  being  a  common  carrier,  it  is  subject  to 
proper  obligations  and  to  conduct  its  business  in  a 
manner  conductive  to  the  public  benefit,  and  to  be 
controlled  by  law.  .  .  .  Any  person  or  corporation 
engaged  in  telephone  business,  operating  telephone 
lines,  furnishing  telephonic  connections,  facilities  and 
services  to  business  houses,  persons  and  companies, 
and    discriminating    against    any    person    or    company, 

People  V.  Albion  Waterworks  Co.,  121  N.  Y.  S.  660;  People  ex  rel. 
Johnson  v.  Barrows,  124  N.  Y.  S.  270;  Silkman  v.  Board  of  Water 
Comrs.  of  Yonkers,  152  N.  Y.  327,  46  N.  E.  612,  37  L.  R.  A.  827,  71 
Hun  (N.  Y.)  37;  Wright  v.  Glen  Tel.  Co.,  95  N.  Y.  S.  101,  48  Misc. 
Rep.  192;  People  ex  rel.  New  York  Tel.  Co.  v.  Public  Service  Com- 
mission  (N.  Y.),  141  N.  Y.  S.  1018. 

NORTH  CAROLINA.— Clinton-Dunn  Tel.  Co.  v.  Carolina  Tel.  & 
T.  Co.,  —  N.  Car.  —  74  S.  E.  636;  Griffin  v.  Goldsboro  Water  Co., 
122  N.  Car.  206,  30  S.  E.  319,  41  L.  R.  A.  240. 

OHIO.— Cincinnati,  H.  &  D.  R.  Co.  v.  Bowling  Green,  57  Ohio  St. 
336,  49  N.  E.  121,  41  L.  R.  A.  422;  Mansfield  v.  Humphreys  Mfg.  Co., 
82  Ohio  St.  216,  92  N.  E.  233,  31  L.  R.  A.  (N.  S.)  301. 

OKLAHOMA.— Hine  v.  Wadlington,  33  Okla.  173,  124  Pac.  299. 

OREGON.— Haugen  v.  Albina  Light  &  Water  Co.,  21  Ore.  411, 
28  Pac.  244,  14  L.  R.  A.  424. 

PENNSYLVANIA.— Allegheny  County  Light  Co.  v.  Shadyside 
Electric  Light  Co.,  37  Pa.  Super.  Ct.  79;  Bailey  v,  Fayette  Gas-Fuel 
Co.  193  Pa.  175,  44  Atl.  251;  Clairton  Steel  Co.  v.  Manufacturers'  L. 
&  H.  Co.   (Pa.),  87  Atl.  998. 

SOUTH  CAROLINA.— State  ex  rel.  Gwynn  v.  Citizens'  Tel.  Co., 
61  S.  Car.  83,  39  S.  E.  257,  55  L.  R.  A.  139,  85  Am.  St.  870. 

TEXAS.— Southwestern  Tel.  &  T.  Co.  v.  Luckett  (Tex.),  127  S. 
W.  856. 

VIRGINIA.— Exchange  &  Bldg.  Co.  v.  Roanoke  Gas  &  Water  Co., 
90  Va.  83,  17  S.  E.  789. 

WASHINGTON.— State  ex  rel.  South  Bend  v.  Mountain  Spring 
Co.,  56  Wash.  176,  105  Pac.  243,  34  L.  R.  A.  (N.  S.)  196. 

WISCONSIN.— President  and  Trustees,  &c.,  v.  Southern  Wis- 
consin Power  Co.,  149  Wis.  168,  135  N.  W.  499. 


265  NO    DISCRIMINATION    IN    SERVICE.  §215 

can  be  compelled  by  mandate,  on  the  petition  of  such 
person  or  company  discriminated  against,  to  furnish 
to  the  petitioner  a  like  service  as  furnished  to  others." 

§  215.  Municipal  public  utility  must  serve  public 
granting  it  franchise. — The  case  of  Hatch  v.  Con- 
sumers' Co.,  17  Idaho  204,  104  Pac.  670,  40  L.  R.  A. 
(N.  S.)  263,  decided  in  1909,  furnishes  the  following 
excellent  statement  of  this  rule:  "In  the  first  place, 
the  defendant  is  a  creature  of  the  laws  of  this  state 
created  for  a  special  purpose  of  a  public  character.  It 
is  not  permitted  like  a  private  p^rty  to  charge  what- 
ever it  pleases  or  to  serve  those  only  whom  it  may 
choose  to  serve.  It  must,  on  the  contrary,  serve  the 
inhabitants  of  the  municipality  from  which  it  receives 
a  franchise  for  a  reasonable  uniform  compensation  to 
be  established  in  conformity  with  law  (§  2839,  Rev. 
Codes),  and  it  must  serve  all  persons  without  distinc- 
tion or  discrimination  who  pay  the  rates  established 
and  comply  with  the  reasonable  rules  and  regulations 
of  the  company." 

§  216.  Uniform  service  to  all  of  class  and  of  simi- 
lar classes. — By  way  of  defining  the  conditions  which 
determine  the  class  and  fix  the  terms  of  service  ac- 
cordingly the  case  of  Missouri  v.  Bell  Tel.  Co.,  23  Fed. 
539,  decided  in  1885,  ''^  an  early  decision  prohibiting 
a  telephone  company  from  limiting  its  service  to  one 
telegraph  company  or  to  any  particular  line  of  busi- 
ness. In  holding  that  having  established  a  telephone 
system  it  must  serve  all  classes  of  business  including 
any  telegraph  company  that  applied  for  service  in  the 
same  way  and  without  discrimination,  the  court  said: 
"A  telephonic  system  is  simply  a  system  for  the  trans- 
mission of  intelligence  and  news.  It  is,  perhaps,  in  a 
limited  sense,  and  yet  in  a  strict  sense,  a  common  car- 


§  217  PUBLIC    UTILITIES.  266 

rier.  It  must  be  equal  in  its  dealings  with  all.  It 
may  not  say  to  the  lawyers  of  St.  Louis,  'my  license 
is  to  establish  a  telephonic  system  open  to  the  doctors 
and  the  merchants,  but  shutting  out  you  gentlemen  of 
the  bar.'  The  moment  it  establishes  a  telephonic 
system  here,  it  is  bound  to  deal  equally  with  all  citi- 
zens in  every  department  of  business;  and  the  moment 
it  opened  its  telephonic  system  to  one  telegraph  com- 
pany that  moment  it  put  itself  in  a  position  where  it 
was  bound  to  open  its  system  to  any  other  telegraph 
company  tendering  equal  pay  for  equal  service." 

§217.  Contract  for  exclusive  telephone  service 
invalid. — The  case  of  State  ex  rel.  Gwynn  v.  Citizens' 
Tel.  Co.,  61  S.  Car.  83,  39  S.  E.  257,  55  L.  R.  A.  139, 
85  Am.  St.  870,  decided  in  1901,  with  reference  to  this 
point,  states  the  general  rule  requiring  the  same  ser- 
vice to  be  rendered  to  all  members  of  any  particular 
class;  and  in  refusing  to  sustain  the  condition  upon 
which  such  service  was  to  be  rendered — that  the  cus- 
tomer would  use  that  service  to  the  exclusion  of  simi- 
lar service  offered  by  a  competing  public  service 
corporation — the  court  said:  "When  therefore,  the 
relator  applied  to  the  respondent  to  replace  the  tele- 
phone instruments  in  his  grocery  store  and  in  his  resi- 
dence, from  whence  they  had  been  removed  by  the 
defendant  company  but  a  few  days  before,  the  re- 
spondent was,  in  our  opinion,  bound  to  comply  with 
such  demand,  under  the  obligations  to  the  public 
which  it  had  assumed.  The  reason  given  for  its 
refusal — that  the  relator  refused  to  agree  that  he 
would  use  respondent's  telephone  system  exclusively — 
was  not  sufficient  to  relieve  it  from  its  obligation  to 
serve  the  public,  of  which  the  relator  was  one,  without 
any  discrimination  whatsoever;  and  especially  is  this 
so  when  it  was  admitted  that  the  respondent  was,  at 


267  NO    DISCRIMINATION    IN    SERVICE.  §  2l8 

the  time,  affording  to  one  person,  at  least,  who  was 
engaged  in  the  same  business  as  that  of  the  relator, 
whose  place  of  business  was  on  the  same  street  of  the 
same  city,  the  same  facilities  which  the  relator  de- 
manded, without  requiring  any  such  stipulation  as  that 
required  of  the  relator,  but  who  was,  in  fact,  using 
both  telephone  systems." 

§  218.  Value  of  service  to  customer  no  valid  basis 
for  rate  classification. — Nor  is  there  any  justification 
for  making  a  greater  charge  for  municipal  public 
utility  service  to  a  particular  customer  on  account  of 
the  greater  value  to  him  of  such  service  or  the  greater 
profit  that  would  probably  accrue  to  him  than  to 
some  other  customer.  The  public  service  corporation 
is  not  permitted  to  discriminate  against  a  competitor 
in  its  service  because,  having  undertaken  to  render 
such  service  to  the  public  generally,  it  can  not  refuse  to 
serve  all,  even  including  its  competitors,  without  dis- 
crimination, for  as  the  court  in  the  case  of  Postal 
Cable  Tel.  Co.  v.  Cumberland  Tel.  &  T.  Co.,  177  Fed. 
726,  decided  in  1910,  observes:  "A  telephone  com- 
pany, which  is  often  described  as  a  common  carrier 
of  news,  is  engaged  in  a  quasi  public  service,  affected 
with  a  public  interest,  for  which  it  is  endowed  with 
some  of  the  sovereign  powers  of  the  state,  and  as  such 
is  held  to  the  obligation  of  an  impartial  and  undis- 
criminating  service  to  the  public  upon  common-law 
principles.  .  .  .  This  common-law  obligation  of 
equal  and  undiscriminating  service  clearly  requires 
that  the  same  charges  shall  be  made  to  all  persons 
for  the  rendering  of  similar  service.  ...  It  is 
clear  that  a  greater  charge  is  not  justified  against  the 
telegraph  company  merely  on  account  of  the  greater 
profit  which  it  may  receive  from  the  telephone  service 
than  other  business  patrons.     .     .     .     But,  even  if  the 


§  219  PUBLIC    UTILITIES.  268 

defendant  were  engaged  to  any  material  extent  in  the 
telegraph  business  in  addition  to  its  telephone  busi- 
ness, I  am  of  opinion  that  its  obligations  in  respect 
to  its  telephone  business  must  be  determined  with  ref- 
erence to  that  business  alone,  and  that  it  has  not  the 
right  to  discriminate  in  charges  for  telephone  service, 
merely  because  it  may  also  be  engaged  in  another 
branch  of  business  which  it  desires  to  protect  by  such 
discrimination." 

§  219.  Reasonable  regulations  for  securing  pay- 
ment for  service. — As  the  privilege  of  providing  public 
utility  service  includes  the  right  to  collect  a  reasonable 
charge  therefor,  the  corporation  rendering  the  service 
is  permitted  in  its  own  protection  to  require  charges 
for  such  service  to  be  paid  in  advance  or  where  it  is 
impossible  to  determine  in  advance  the  amount  of  the 
charges  because  they  depend  on  the  extent  of  the 
service  used,  the  corporation  may  by  reasonable  regu- 
lations require  the  securing  of  the  payment  for  such 
service  by  a  cash  deposit  in  advance,  or  in  some  such 
manner  insure  the  making  of  the  payment  and  thus 
avoid  the  loss  due  to  failure  to  pay  or  the  expense  of 
making  collection,  all  of  which,  if  sustained,  would 
ultimately  be  shifted  to  the  customers  who  did  pay 
with  the  effect  of  increasing  the  amount  of  their  pay- 
ment to  the  extent  of  such  loss.  The  case  of  Irvin 
V.  Rushville  Co-Operative  Tel.  Co.,  i6i  Ind.  524,  69 
N.  E.  258,  decided  in  1903,  furnishes  a  good  statement 
of  this  rule  together  with  the  reason  upon  which  it 
is  based  as  follows:  "Considering  the  quasi  public 
functions  of  corporations  like  the  one  at  bar — cor- 
porations whose  first  duty  is  to  the  public  whom  they 
serve — we  think  that  their  revenues  should  not  be 
depleted  by  the  furnishing  of  service  to  individuals 
who   refuse    to    pay    because    they    are    asserting    col- 


269  NO    DISCRIMINATION    IN    SERVICE.  §  220 

lateral  demands  against  it.  .  .  .  It  can  maintain 
an  efficient  service  only  through  prompt  payment  of 
its  dues  and  tolls,  and  because  of  that  fact  it  may  use 
the  summary  remedy  of  denying  service  for  nonpay- 
ment. It  can  not  be  said  it  may  be  denied  the  benefit 
of  this  rule  because  a  patron  claims  the  company  is 
indebted  to  him.  It  can  not  be  required  to  stop  and 
adjudicate  claims  held  against  it.  The  law  compels 
it  to  furnish  service.  A  patron  may  take  service  or 
not,  as  he  chooses.  It  must  furnish  efficient  service 
to  all  alike  who  are  alike  situated,  and  must  not  dis- 
criminate in  favor  of  or  against  any  one." 

§  220.     Discontinuing    service    for    nonpayment. — 

As  a  necessary  consequence  of  this  rule  it  follows 
that  a  customer  who  is  in  default  for  the  payment  of 
his  service  and  who  fails  to  pay  for  the  service  already 
rendered  can  not  complain  if  the  service  is  discon- 
tinued pending  his  payment  for  that  already  received. 
This  is  recognized  as  a  convenient  means  of  making 
collection,  for  as  the  court  in  the  case  of  State  ex  rel. 
Latshaw  v.  Board  of  Water  &  Light  Comrs.,  105 
Minn.  472,  117  N.  W.  827,  127  Am.  St.  581,  decided 
in  1908,  says:  "Both  on  reason  and  authoritity  the 
method  of  collection  here  in  issue  was  reasonable  and 
proper.  With  unusual  unanimity,  such  regulations 
have  been  sustained  alike  where  there  is  statutory  au- 
thority and  where  there  is  not.  .  The  im- 
position of  a  fifteen-cent  penalty  or  discount  and  of 
certain  costs  and  expenses  of  shutting  off  the  gas  and 
turning  it  on  as  parts  of  the  arrearage  charged  relator 
does  not  entitle  relator  to  the  mandamus  he  seeks." 

§  221.  Discrimination  by  rebates  illegal. — The  re- 
cent case  of  President  and  Trustees.  &c.,  v.  Southern 
Wisconsin  Power  Co..   149  Wis.   168.   135   N.  W.  499, 


§  222  PUBLIC    UTILITIES.  27O 

decided  in  1912,  furnishes  an  interesting  illustration  of 
the  fact  that  discrimination  in  charges  by  way  of 
rebates  for  such  service  is  an  evil  practice  of  long 
standing  vv^hich  has  continued  down  to  current  times. 
In  holding  invalid  an  agreement  to  give  rebates  for 
services  rendered  although  it  was  outstanding  when 
legislative  action  was  enacted  against  the  continuance 
of  such  a  practice,  the  court  said:  "It  could  hardly 
be  claimed  under  these  sections  of  the  public  utilities 
law  that  a  utility  could,  by  resorting  to  any  device 
or  subterfuge,  make  a  valid  agreement  with  a  con- 
sumer to  furnish  the  latter  with  free  current  to  the 
amount  of  $3,500  per  year;  and  the  appellant  does 
not  so  claim.  Some  of  the  main  purposes  of  this  law 
were  to  compel  public  service  corporations  to  file  their 
rates,  so  that  they  would  be  open  to  public  inspection, 
to  make  reasonable  rates  of  charge,  and  to  make  one 
consumer  pay  the  same  as  another,  where  the  service 
was  furnished  under  substantially  similar  conditions. 
.  .  .  The  village  of  Kilbourn  is  one  of  the  patrons 
of  the  defendant  that  is  entitled  to  receive  the  same 
consideration  in  the  matter  of  rates  of  charge  that 
any  other  patron  is  entitled  to  receive — no  less,  no 
more.  By  taking  advantage  of  a  situation  where  it 
was  able  to  force  the  defendant  into  making  an  un- 
lawful contract,  it  can  no  more  profit  thereby  than 
could  any  other  purchaser  of  current  from  the  de- 
fendant." 

§  222.  Rates  for  service  not  taxes  need  not  be 
uniform  under  constitution. — The  rates  charged  for 
public  utility  service,  however,  are  not  taxes  within 
the  meaning  of  those  constitutional  provisions  re- 
quiring uniformity  of  taxation,  so  that  absolute  uni- 
formity of  rates  to  customers  is  not  required  by  such 
constitutional  or  statutory  provisions;  but  in   the   ab- 


271  NO    DISCRIMINATION    IN    SERVICE.  §  22T, 

sence  of  a  statute  to  the  contrary  some  courts,  includ- 
ing that  in  the  case  of  State  ex  rel.  Ferguson  v.  Birm- 
ingham Waterworks  Co.,  164  Ala.  586,  51  So.  354,  27 
L.  R.  A.  (N.  S.)  674,  decided  in  1910,  have  held  that 
any  material  reduction  below  the  prevailing  rate  which 
was  supposed  to  be  a  reasonable  one  would  indicate 
that  the  prevailing  rate  was  excessive  and  that  it 
should  be  reduced  accordingly,  for  as  the  court  in  the 
above  case  says:  "And  it  must  serve  all  with  equal 
facilities  and  without  discrimination.  In  this  case  no 
complaint  is  made  that  relator  is  discriminated  against 
in  respect  to  facilities  furnished  in  the  way  of  getting 
a  supply  of  water,  but  only  in  respect  to  the  price 
charged.  It  would  seem  that,  if  the  rate  granted  to 
favored  customers  is  less  than  the  reasonable  rate  the 
company  may  lawfully  demand  from  all  consumers 
on  a  basis  of  uniformity,  as  on  the  allegations  of  the 
petition  we  must  assume  to  be  the  case,  the  consequent 
discrimination  is  enjoyed  by  those  having  the  favored 
rate  at  the  expense  of  the  company,  and  does  not  im- 
pinge upon  any  right  of  consumers  generally,  for  they 
are  receiving  all  they  are  entitled  to  have  in  any  event. 
Griffin  v.  Goldsboro  Water  Co.,  supra.  The  granting 
of  a  rate  to  any  considerable  number  of  consumers 
more  favorable  to  them  than  the  rate  fixed  for  con- 
sumers generally,  in  the  absence  of  possible  peculiar 
circumstances  of  justification,  would  be  evidential  that 
the  general  rate  is  unreasonably  high,  which  would  call 
for  municipal  or  legislative  revision  to  be  enacted  in 
a  due  observance  of  constitutional  limitations.  But 
we  do  not  see  our  way  clear  to  a  holding  that,  when- 
ever a  water  company  makes  a  concession  to  a  con- 
sumer, it  thereby  fixes  a  new  schedule  of  rates  for  all 
its  consumers." 

§  223.     Discrimination  in  favor  of  public  or  charity. 
— A  discrimination  in  rates  by  way  of  a  reduction  for 


§  223  PUBLIC    UTILITIES.  2/2 

the  services  rendered  for  public  purposes  as  well  as 
services  rendered  charitable  institutions  in  the  absence 
of  a  statute  expressly  prohibiting  such  concessions 
has  been  sustained  by  a  number  of  our  courts.  Indeed 
it  is  not  uncommon  to  provide  for  free  water  service 
for  use  of  the  public  in  connection  with  the  fire  depart- 
ment, the  parks  and  similar  uses  which  is  treated  sim- 
ply as  a  part  of  the  consideration  for  the  franchise 
privileges  granted  by  the  municipality  receiving  such 
service.  As  the  court  in  the  case  of  Preston  v.  Board 
of  Water  Comrs.,  117  Mich.  589,  76  N.  W.  92,  decided 
in  1898,  expresses  it:  "The  record  also  shows,  as  will 
appear  more  fully  later,  the  rates  fixed  are  equitable 
and  reasonable.  It  has  already  appeared  that  the  free 
use  of  water  given  is  only  to  institutions  in  which  the 
city  and  all  its  citizens  are  interested,  and,  where  a  par- 
tial rate  is  charged,  the  recipient  is  a  charitable  insti- 
tution or  an  educational  institution  in  the  mainten- 
ance of  which  the  public  is  more  or  less  interested. 
.  .  .  The  board  is  very  properly  given  wide  dis- 
cretion in  the  management  of  the  water  plant.  Detroit 
V.  Board  of  Water  Comrs.,  108  Mich.  494,  66  N.  W. 
377.  There  is  nothing  in  the  record  to  show  they  have 
abused  this  discretion  in  fixing  the  rates.  We  think 
it  is  not  accurate  to  speak  of  these  rates  as  taxes.  All 
property  except  that  which  is  exempt  by  law  is  sub- 
ject to  the  payment  of  taxes,  but  the  use  of  water  is 
not  compulsory.  .  .  .  When  property  has  paid  its 
proportion  of  the  taxes  growing  out  of  fire  protection 
and  other  uses  in  which  property  and  the  public  in 
general  has  an  interest,  it  has  discharged  its  share  of 
the  burden." 

For  the  same  reason  concessions  have  been  per- 
mitted to  charitable  institutions  because  their  service 
is  of  a  public  nature  and  for  the  public  good.    A  good 


273  N^    DISCRIMINATION    IN    SERVICE.  §  224 

Statement  of  the  principle  permitting  this  discrimina- 
tion is  furnished  in  the  case  of  New  York  Tel.  Co. 
V.  Siegel-Cooper  Co.,  202  N.  Y.  502,  96  N.  E.  109,  36 
L.  R.  A.  (N.  S.)  560,  decided  in  1911,  as  follows: 
"The  parties  expressly  stipulated  that  the  charitable 
institutions  in  question  are  performing  services  of 
special  benefit  to  the  community  as  a  whole,  are 
worthy  of  charitable  assistance,  and  have  long  been 
accustomed  to  receive  contributions  from  members  of 
the  general  public.  They  further  stipulated  that  the 
discount  to  the  city  of  New  York  was  allowed  on 
account  of  its  intimate  relation  to  the  plaintiff,  through 
its  control  of  streets  and  its  power  of  regulation,  'as  a 
contribution  to  the  expense  and  cost  of  the  govern- 
ment of  the  city  of  New  York.'  The  plaintiff  received 
from  the  city  for  a  small  consideration  a  franchise  of 
immense  value,  without  which  it  could  not  carry  on  its 
business  at  all.  While  under  no  legal  obligation  to 
discriminate  in  favor  of  the  city,  there  is  a  strong 
equitable  obligation  to  do  so,  founded  on  benefits 
received,  and  supported  by  custom." 

§  224.  Inadequate  supply  no  justification  for  dis- 
crimination.— In  the  case  of  State  v.  Consumers'  Gas 
Trust  Co.,  157  Ind.  345,  61  N.  E.  674,  55  L.  R.  A.  245. 
decided  in  1901,  the  defense  to  an  action  of  mandamus 
by  an  inhabitant  who  had  been  denied  public  utility 
service  was  that  the  company  was  organized  as  a 
voluntary  enterprise  in  the  general  interest  of  the  peo- 
ple of  Indianapolis  and  that  its  purpose  was  not  the 
making  of  money  but  to  furnish  gas  to  consumers  in 
that  city  at  the  lowest  possible  rate;  that  the  amount 
of  gas  available  was  insufficient  to  supply  the  custom- 
ers which  the  company  then  had;  and  that  the  effect 
of  extending  service  to  the  party  demanding  it  in  this 
case  would  be  a  further  reduction  in  the   already  in- 

18— Pub.  Ut 


§  224  PUBLIC    UTILITIES.  2/4 

sufficient  supply.  In  holding  this  defense  insufficient 
for  the  reason  that  the  right  to  receive  the  service 
belongs  in  common  to  all  living  on  the  streets  where 
the  service  was  furnished  the  court  said  that  the  com- 
pany could  not  exercise  its  rights  and  furnish  service 
for  the  benefit  of  any  class  or  of  any  part  of  the  public 
less  than  the  whole  residing  within  the  range  of  its 
service,  for  the  undertaking  of  the  company  was  with 
the  state  and  the  extraordinary  powers  including  those 
of  eminent  domain  were  granted  in  consideration  of 
its  undertaking  to  serve  the  entire  community  with  the 
convenience  of  natural  gas  and  not  to  render  a  service 
for  the  benefit  of  a  few  or  to  favorites,  but  that  the 
service  was  a  convenience  available  equally  to  every 
citizen  similarly  situated  who  might  wish  to  avail 
himself  of  the  privilege  and  was  prepared  to  receive 
it,  for  as  the  court  said:  "The  appellee  is  a  corpora- 
tion authorized  by  the  legislature  to  exercise  the  right 
of  eminent  domain  (Acts  1889,  p.  22),  and  licensed  by 
the  city  of  Indianapolis  to  lay  pipe  lines  through  its 
streets  and  alleys  for  the  transportation  and  distribu- 
tion of  natural  gas  to  its  customers.  These  rights, 
which  involve  an  element  of  sovereignty,  and  which 
can  exist  only  by  grant  from  the  public,  are  rooted  in 
the  principle  that  their  existence  will  bestow  a  benefit 
upon  that  part  of  the  public  in  whose  behalf  the  grant 
is  made,  and  the  benefit  received  by  the  citizen  is  the 
adequate  consideration  for  the  right  and  convenience 
surrendered  by  him.  The  grant  thus  resting  upon  a 
public  and  reciprocal  relation  imposes  upon  the  ap- 
pellee the  legal  obligation  to  serve  all  the  members  of 
the  public  contributing  to  its  asserted  right  impar- 
tially, and  to  permit  all  such  to  use  gas  who  have 
made  the  necessary  arrangements  to  receive  it  and 
apply  therefor,  and  who  pay,  or  offer  to  pay,  the  price, 


275  NO    DISCRIMINATION    IN    SERVICE.  §  22$ 

and  abide   the   reasonable   rule   and   regulations   of  the 
company." 

§  225.  Rule  necessary  to  protect  poorer  classes 
especially. — As  the  case  of  Birmingham  v.  Birmingham 
A\'ater  Co.  (Ala.),  42  So.  lo,  decided  in  1906.  ex- 
presses the  reason  for  this  rule :  "Were  the  law  other- 
wise, the  municipal  authorities  might  by  collusion  with 
the  water  company  and  acting  in  the  interest  of  the 
more  wealthy  and  influential  class  of  citizens,  make 
a  contract,  by  the  provisions  of  which  the  water  tax 
would  fall  more  lightly  upon  the  wealthy  and  influen- 
tial, at  the  expense  of  being  very  burdensome  upon 
the  poorer  or  less  fortunate  class  of  citizens." 

§  226.  Suburban  customer  may  be  classified  as 
such. — That  the  applicant  for  service  located  in  the 
suburbs  or  outlying  districts  of  the  municipality  may 
be  placed  in  a  separate  class  and  subjected  to  different 
charges  and  conditions  because  of  the  distance  he  re- 
sides from  the  thickly  populated  district  and  of  the 
sparsely  settled  condition  of  his  neighborhood  requir- 
ing a  relatively  greater  expenditure  and  smaller  return 
for  the  service  rendered  than  in  the  more  thickly,  cen- 
trally located  districts  of  the  municipality  is  decided  in 
the  case  of  Souther  v.  Gloucester,  187  Mass.  552,  73 
N.  E.  558,  69  L.  R.  A.  309,  decided  in  1905,  where  the 
court  says:  "The  special  cost  of  extending  the  system 
to  the  'outlying  section'  in  question;  the  fact  that, 
even  if  water  is  wanted  there  for  less  than  a  year  as 
a  rule,  the  interest  on  the  cost  of  the  necessary  special 
construction  and  on  the  construction  of  the  works 
as  a  whole  runs  throughout  the  year;  and  the  fact, 
if  it  is  a  fact,  that  there  are  but  few  persons  who  take 
water  in  this  section,  compared  with  the  cost  of  ex- 
tending the  water  system  to  it — are  all  of  them  mat- 


§  22/  PUBLIC    UTILITIES.  276 

ters  which  can  be  taken  into  account  in  fixing  a  rea- 
sonable rate.  .  .  .  The  plaintiffs,  in  any  event, 
can  not  complain  that  some  discrimination  is  made 
between  them  and  water  takers  in  the  heart  of  the 
city,  and  they  have  gone  no  further  than  that  in  their 
proof  in  the  case  at  bar.  There  is  not  enough  here  to 
enable  us  to  say  that,  provided  some  discrimination 
can  be  made,  the  discrimination  made  is  too  great." 

§  227.  Quantity  of  service  as  basis  of  classifica- 
tion.— Some  of  our  cases  have  permitted  the  public 
service  corporation  to  make  a  reduction  in  its  charges 
for  service  to  a  particular  class  of  large  consumers 
because  of  their  capacity  requiring  an  unusual  amount 
of  service  or  because  of  the  nature  of  the  use  made  of 
the  service  and  the  conditions  upon  which  it  is  fur- 
nished. The  case  of  Logansport  &  W.  V.  Gas  Co.  v. 
Ott,  30  Ind.  App.  93,  65  N.  E.  549,  sustained  a  uni- 
form reduction  in  the  charge  for  gas  service  rendered 
laundries  in  a  certain  municipality.  The  service,  how- 
ever, was  conditioned  that  it  might  be  discontinued 
without  notice  at  any  time  in  the  event  of  an  insuf- 
ficient supply.  There  being  nothing  in  the  franchise 
prohibiting  such  a  special  agreement  being  made,  the 
court  recognized  that  it  was  virtually  an  arrangement 
for  disposing  of  the  surplus  supply  by  wholesale  which 
might  be  on  hand  at  any  time  and  upheld  the  agree- 
ment. 

The  case  of  Silkman  v.  Yonkers,  152  N.  Y.  327,  46 
N.  E.  612,  37  L.  R.  A.  827,  71  Hun  37,  decided  in 
1897,  sustained  a  graduated  scale  of  charges  for  water 
service  depending  upon  the  quantity  consumed  as 
provided  in  the  statute,  the  court  saying:  "Surely,  it 
can  not  be  said  to  be  unreasonable  to  provide  less 
rates  where  a  large  amount  of  water  is  used  than  where 
a  small  quantity  is  consumed.     That  principle  is  usu- 


277  NO    DISCRIMINATION    IN    SERVICE.  §  228 

ally  present  in  all  contracts  or  established  rents  of  that 
character.  It  will  be  found  in  contracts  and  charges 
relating  to  electric  lights,  gas,  private  water  com- 
panies, and  the  like,  and  is  a  business  principle  of 
general  application.  We  find  in  the  rates  as  they  were 
established  nothing  unreasonable,  or  that  would  in 
any  way  justify  a  court  in  interfering  with  them." 

§  228.  Classification  between  old  and  new  sub- 
scribers invalid. — The  case  of  Bradford  v.  Citizens' 
Tel.  Co.,  161  Mich.  385,  126  N.  W.  444,  decided  in 
1910,  in  recognizing  the  increasing  cost  of  operating 
a  larger  telephone  exchange  held,  however,  that  the 
charge  to  customers  who  became  subscribers  to  the 
service  after  a  particular  date  could  not  be  greater 
than  to  the  old  subscribers  because  all  were  to  be 
served  with  identically  the  same  service  and  with  the 
same  fixtures,  the  court  saying:  "While  it  is  probably 
true  that  the  cost  of  operating  a  telephone  exchange 
increases  with  the  increased  volume  of  business,  it  is 
equally  true  that  the  whole  body  of  subscribers, 
whether  new  or  old,  makes. the  added  expense,  and 
reaps  the  added  benefit.  A  telephone  exchange  with 
1.000  members  is  manifestly  more  valuable  to  every 
subscriber  than  one  with  100  members,  but  it  is  equally 
valuable  to  each  member  in  the  same  class,  and  its 
value  to  the  subscriber  does  not  depend,  in  any  degree, 
upon  whether  he  is  a  new  subscriber  or  an  old  one. 
It  is  difficult  to  understand  why  new  subscribers 
should  pay  any  more  for  the  right  to  talk  to  old  mem- 
bers than  the  latter  do  for  the  right  to  talk  to  new 
ones." 

§  229.  Nature  of  use  of  gas  service  not  proper 
basis  of  classification. — Nor  can  the  use  to  which  the 
service    is    to   be    put    be    taken    as    the   basis    for    dis- 


§229  PUBLIC    UTILITIES.  278 

criminating  in  the  charges  for  such  service  so  that 
whether  gas  be  used  for  light  or  heat  the  charge  must 
remain  the  same,  although  the  substitute  in  the  one 
case  might  be  more  expensive  than  in  the  other,  for 
as  is  said  in  the  case  of  Bailey  v,  Fayette  Gas-Fuel 
Co.,  193  Pa.  175,  44  Atl.  251,  decided  in  1899,  "It  is 
not  claimed  that  there  is  any  difference  in  the  cost  of 
the  product  of  the  company,  the  expense  of  supplying 
it  at  the  point  of  delivery,  or  its  value  to  the  company 
in  the  increase  of  business  or  other  wrays.  .  .  . 
The  real  argument  seeks  to  justify  the  difference  in 
price  solely  by  the  value  of  the  gas  to  the  consumer 
as  measured  by  what  he  would  have  to  pay  for  a 
substitute  for  one  purpose  or  the  other  if  he  could  not 
get  the  gas.  This  is  a  wholly  inadmissible  basis  of 
discrimination." 


CHAPTER  XIV. 

LIABILITY    OF    WATER-WORKS    COMPANIES 
FOR  FIRE  LOSS. 


Section. 

230.  The  consumer  the  real  party  interested. 

231.  The  inhabitant  may  enforce  franchise  rights. 

232.  Franchise  or  contract  for  benefit  of  inhabitants. 

233.  Liability  to  consumer  for  fire  loss  from  failure  of  water  supply. 

234.  Recovery  denied  for  duty  governmental. 

235.  Right  of  municipality  to  recover  for  loss. 

236.  E.\pediency  of  rule  refusing  recovery. 

237.  Liability  to  customer  for  negligence. 

238.  Recovery  by  consumer  in  contract  or  for  negligence. 

239.  Recovery  by  consumer  as  taxpayer. 

240.  Customer  not  municipality  real  party  in  interest  to  contract 

241.  Customer  party  to  contract  may  recover. 

242.  Water-works  company  not  insurer. 

243.  Duty  under  franchise  to  supply  water. 

244.  Owner  of  property  only  party  who  can  sue  for  loss. 

245.  Beneficiary  of  contract  may  sue  for  its  breach. 

246.  Consideration  furnished  by  beneficiary. 

247.  Liability  for  fire  loss  contemplated  by  contract. 

248.  Contract  expressly  assumes  risk  of  fire  loss. 

249.  Reasons  for  denying  recovery  stated. 

250.  Recovery  held  not  in  contemplation  of  parties. 

251.  Recovery  denied  for  want  of  privity  between  parties. 

252.  No  recovery  not  expressly  provided  for  in  contract. 

253.  Duty  governmental  and  no  liability. 

254.  Water-works  company  subrogated  for  municipality. 

255.  Recovery    denied,    although    expressly    stipulated    by    contract. 

256.  No  recovery  contemplated  in  fixing  rates. 

257.  Impracticable  to  permit  recovery. 

258.  Liability  would   require  prohibitive  rates. 

259.  Contract    only    with    municipality    to    furnish    water    for    Are 

protection. 

260.  Express   contract   for   water   service  for  fire  protection   neces- 
sary. 

279 


§  230  PUBLIC    UTILITIES.  28O 

Section. 

261.  Rate   for   service   indicates   no   liability   for   fire   loss   contem- 

plated. 

262.  Interest  of  taxpayer  and  consumer  in  contract  only  incidental. 

263.  Recovery  only  by  party  to  contract  expressly  stipulated. 

§  230.     The  consumer  the  real  party  interested. — 

As  a  general  rule  the  rights  created  by  the  acceptance 
of  the  franchise  and  the  undertaking  of  the  municipal 
public  utility  to  provide  its  service  to  all  on  the  same 
conditions,  which  is  the  consideration  for  the  grant 
of  the  franchise  rights,  as  has  already  been  shown, 
belong  to  the  inhabitants  of  the  municipal  corporation 
as  well  as  to  the  corporation  itself.  The  right  of  the 
inhabitants  to  receive  proper  service  in  accordance 
with  the  stipulations  of  the  franchise  on  reasonable 
terms  and  conditions  is  generally  recognized  and  may 
be  enforced  by  the  individual  in  his  own  name  by  vir- 
tue of  the  fact  that  he  is  an  inhabitant  of  the  munici- 
pality. Indeed,  the  inhabitant  generally  is  the  real 
party  in  interest  and  together  with  the  corporation 
providing  municipal  public  utility  service  is  generally 
the  only  party  really  and  ultimately  interested  in  the 
matter;  for  except  as  to  the  public  service  rendered  the 
municipality  itself,  its  only  interest  is  in  seeing  that 
the  provisions  of  the  franchise  are  performed  and  the 
rights  of  its  inhabitants  are  secured  in  accordance  with 
its  terms. 

§  231.  The  inhabitant  may  enforce  franchise 
rights. — With  reference  to  the  nature  of  the  duty  of 
public  service  corporations  so  well  enunciated  in  the 
case  of  Munn  v.  People  of  Illinois,  94  U.  S.  113,  24 
L.  ed.  JJ,  the  fact  that  the  service  is  rendered  to  the 
public  subjects  it  to  public  regulation  and  control  in 
the  interest  of  the  public  and  for  the  benefit  of  any 
member  thereof  which  may  be  especially  affected  or 
directly  interested.     This  principle,  therefore,  is  fully 


28l  LIABILITY   OF    WATER    COMPANIES.  §  232 

applicable  to  corporations  providing  municipal  public 
utility  service,  and  the  case  of  Pond  v.  New  Rochelle 
Water  Co.,  183  N.  Y.  330,  76  N.  E.  211,  i  L.  R.  A.  (N. 
S.)  961,  decided  in  1906,  furnishes  an  important  deci- 
sion in  this  connection,  for  it  applies  this  principle 
to  the  matter  of  providing  water  service  for  the  pur- 
pose of  determining  the  rights  of  the  individual  in- 
habitants, who  are  or  desire  to  become  customers  of 
such  service,  to  secure  the  same  by  an  action  in  their 
own  name  in  accordance  with  this  principle  which  is 
best  stated  in  the  early  case,  that  has  long  since  be- 
come a  leading  one,  of  Lawrence  v.  Fox,  20  N.  Y. 
268. 

§  232.  Franchise  or  contract  for  benefit  of  inhabi- 
tants.— In  that  case  there  was  an  amount  of  money 
due  Lawrence  from  one  Holly,  and  in  consideration  of 
a  loan  from  Holly  to  Fox,  he  agreed  to  pay  this  debt 
of  Holly  to  Lawrence;  and  upon  this  agreement,  al- 
though he  had  nothing  to  do  with  the  execution  of  the 
contract,  Lawrence  was  permitted  to  recover  against 
Fox  because  the  agreement  was  made  for  his  benefit. 
This  case  has  been  generally  recognized  wherever  fol- 
lowed as  deciding  that  "an  agreement  made  on  a  valid 
consideration  by  one  with  another,  to  pay  money  to  a 
third,  can  be  enforced  by  a  third  in  his  own  name. 
Nor  need  the  third  person  be  privy  to  the  considera- 
tion," according  to  Secor  v.  Lord,  42  N.  Y.  525;  "nor 
need  he  be  named  especially  as  the  person  to  whom 
the  money  is  to  be  paid."  And  as  the  court  in  this 
case  of  Pond  v.  New  Rochelle  Water  Co.,  supra,  says: 
"The  general  principle  that,  if  one  person  contracts 
for  the  benefit  of  a  third  person,  such  person  may 
maintain  an  action  on  the  agreement,  has  been  applied 
since  early  in  the  seventeenth  century  in  a  large  num- 
ber of  cases;  the  facts  in  each  case  differing  to  some 


§  232  PUBLIC    UTILITIES.  282 

extent.  The  leading  case  in  England  is  Dutton  v. 
Poole,  I  Ventris  318,  decided  in  the  reign  of  Charles 
II.  ,  .  .  The  court  said:  Tt  might  have  been 
another  case  if  the  money  had  been  to  have  been  paid 
to  a  stranger;  but  there  is  such  a  nearness  of  relation 
between  the  father  and  the  child,  'tis  a  kind  of  debt 
to  the  child  to  be  provided  for,  that  the  plaintiff  is 
plainly  concerned.'  ...  In  the  case  before  us  we 
have  a  municipality  entering  into  a  contract  for  the 
benefit  of  its  inhabitants,  the  object  being  to  supply 
them  with  pure  and  wholesome  water  at  reasonable 
rates.  While  there  is  not  presented  a  domestic  rela- 
tion like  that  of  father  and  child  or  husband  and  wife, 
yet  it  can  not  be  said  that  this  contract  was  made  for 
the  benefit  of  a  stranger.  In  the  case  before  us  the 
municipality  sought  to  protect  its  inhabitants  who 
were  at  the  time  of  the  execution  of  the  contract  con- 
sumers of  water,  and  those  who  might  thereafter 
become  so,  from  extortion  by  a  corporation  having 
granted  to  it  a  valuable  franchise  extending  over  a  long 
period  of  time.  We  are  of  opinion  that  the  complaint 
states  a  good  cause  of  action." 

The  decision  of  this  case  that  the  individual  inhabi- 
tant of  the  municipality  could  in  his  own  name  com- 
pel the  furnishing  of  a  water  supply  to  himself  in 
accordance  with  the  stipulations  of  the  contract  and 
at  the  rates  therein  fixed  clearly  establishes  the  prin- 
ciple, which  is  generally  recognized  by  the  courts, 
that  such  franchise  rights  are  available  to  the  inhabi- 
tants of  the  municipality  as  well  as  to  the  municipality 
itself,  and  that  the  individual  inhabitants  may  enforce 
such  rights  by  a  proper  action  as  an  individual  for  the 
reason  that  they  were  created  for  his  own  benefit  as, 
well  as  for  the  advantage  of  the  municipality  and 
because  he  is  the  real  party  in  interest. 


28^  LIABILITY    OF    WATER    COMPANIES.  §  233 

§  233.  Liability  to  consumer  for  fire  loss  from 
failure  of  water  supply. — The  question,  however,  of 
the  liability  of  the  public  service  corporation  for  loss 
from  fire  due  to  its  failure  to  provide  an  adequate 
water  supply  for  the  municipality  and  its  inhabitants, 
which  makes  this  chapter  necessary,  is  one  which  has 
occasioned  much  discussion  and  debate,  and  upon  the 
decision  of  which  our  courts  have  expressly  disagreed. 
A  majority  of  the  decisions  on  this  point  have  held 
that  there  is  no  liability  against  the  corporation  fur- 
nishing water  service  to  a  municipality  and  its  inhabi- 
tants in  accordance  with  the  franchise  for  damages  to 
the  inhabitant  whose  property  is  destroyed  by  fire  be- 
cause of  the  failure  of  the  company  to  furnish  an  ade- 
quate supply  of  its  service  in  accordance  with  its  un- 
dertaking in  the  franchise.  Many  of  the  decisions  to 
this  effect  are  predicated  upon  the  statement  that  the 
contract  is  one  between  the  corporation  furnishing  the 
water  and  the  municipality  and  that  there  is  no  privy 
of  contract  between  the  corporation  and  the  individual 
inhabitant.  Although  payment  for  the  water-works 
plant  and  the  water  furnished  is  often  made  in  part 
from  funds  raised  by  taxing  the  individual  inhabitant 
and  property  owner  of  the  municipality,  he  is  denied 
recovery  for  the  loss  of  his  property  from  fire  due  to 
the  failure  of  the  water  company  to  furnish  an  ade- 
quate supply  of  water,  although  this  would  have  ex- 
tinguished the  fire  and  although  this  service  was  pro- 
vided for  in  the  franchise  and  was  contemplated  by  all 
parties  and  expressly  paid  for. 

§  234.  Recovery  denied  for  duty  governmental. — 
Some  of  the  cases  denying  liability  are  based  on  the 
proposition  that  in  contracting  for  water  service  for 
fire  protection  a  municipality  acts  in  its  governmental 
capacity  so  that  when  the  municipality  itself  furnishes 


§  235  PUBLIC    UTILITIES.  284 

water  for  such  purpose,  it  could  not  be  held  liable  to 
the  citizen  for  a  failure  to  furnish  an  adequate  supply 
of  water  any  more  than  for  a  failure  to  supply  ade- 
quate service  through  its  fire  department;  and  because 
the  municipality  could  not  be  held  liable  for  the  per- 
formance or  failure  to  perform  a  governmental  duty, 
the  private  corporation  under  contract  with  the  mu- 
nicipality to  provide  water  service  is  no  more  liable 
than  the  municipahty  itself.  While  the  courts  gener- 
ally hold  that  the  municipality  is  not  liable  to  perform 
a  governmental  duty  and  that  its  furnishing  of  protec- 
tion against  fire  is  the  performance  of  such  a  duty, 
which  the  municipality  may  or  may  not  undertake 
and  for  the  performance  of  which  it  can  not  be  held 
liable  to  the  individual  citizen  or  property  owner,  the 
courts  are  by  no  means  agreed  that  a  private  corpora- 
tion under  a  franchise  obligation  to  provide  a  water 
supply  to  the  municipality  and  its  inhabitants  for  all 
purposes  is  not  Hable  for  a  failure  to  provide  service 
for  protection  against  fire  equally  with  its  failure  to 
provide  adequate  service  for  any  other  purpose  stipu- 
lated in  the  franchise. 

§  235.     Right  of  municipality  to  recover  for  loss. — 

The  power  of  the  municipality  to  recover  from  the 
corporation,  under  contract  to  provide  a  water  sup- 
ply, for  its  failure  to  render  adequate  service  as  re- 
quired by  its  contract  or  franchise  has  only  been  de- 
cided in  a  few  cases.  This  liability  is  generally  held 
to  depend  upon  the  nature  of  the  franchise  or  contract 
entered  into  between  the  municipality  and  the  com- 
pany undertaking  to  furnish  a  water  supply;  and 
where  the  corporation  merely  undertakes  to  establish 
its  plant  and  furnish  a  water  supply  without  any  ex- 
press stipulation  for  service  as  a  protection  from  fire 
loss,  recovery  for  such  loss,  when  sustained  by  the  mu- 


285  LIABILITY   OF    WATER    COMPANIES.  §  236 

nicipality,  has  been  denied  by  an  application  of  the 
principle,  established  in  a  majority  of  the  cases  with 
reference  to  loss  sustained  by  the  individual  inhabitant, 
that  unless  the  liability  for  fire  loss  is  expressly  stip- 
ulated for,  it  was  not  contemplated  by  the  parties  nor 
intended  to  be  covered  by  their  contract.  This  neces- 
sarily raises  the  question  of  the  construction  of  the 
contract  for  the  purpose  of  determining  the  intention 
of  the  parties  to  it  on  a  point  which  is  not  stipulated 
in  express  terms  and  conditions;  and  as  in  the  case 
of  loss  by  the  individual  inhabitant  the  authorities  are 
not  agreed  as  to  the  right  of  the  municipality  to  re- 
cover. 

§  236.  Expediency  of  rule  refusing  recovery. — It  is 
apparent,  however,  that  the  position,  frequently  main- 
tained in  the  case  of  the  loss  by  the  individual,  that  no 
recovery  can  be  had  because  there  is  a  lack  of  privity 
of  contract  is  not  available  as  a  defense  to  an  action 
by  the  municipality  itself  which  is  a  party  to  the  con- 
tract. Naturally  the  increased  risk  to  the  corporation 
of  holding  it  liable  for  such  loss  might  result  in  such 
an  increased  charge  for  the  seryice  as  to  make  such  a 
provision  inexpedient  because  of  the  increase  in  the 
rate  and  the  enhanced  cost  to  the  municipality.  How- 
ever, a  construction  of  the  contract  or  franchise  which 
refuses  to  find  a  right  in  the  municipality  to  recover 
for  the  loss  of  its  property  due  to  an  inadequate  water 
supply,  as  provided  for  in  the  contract  or  franchise,  is 
inconsistent  with  the  principle  of  strict  construction 
in  favor  of  the  municipality  and  of  the  doctrine  of  the 
implied  powers  of  municipal  corporations,  which,  as 
has  already  been  shown,  is  so  well  established  and 
generally  accepted  by  the  great  weight  of  authority. 
The  question,  however,  is  one  of  construction  and  the 
decisions  vary  in  accordance  with   the  different   inter- 


§  236  PUBLIC    UTILITIES.  286 

pretations  and  the  varying  provisions  of  the  franchises 
and  contracts  of  municipalities  for  water  service.^ 

1  ALABAMA.— Lovejoy  v.  Bessemer  Waterworks  Co.,  146  Ala. 
374,  41  So.  76,  6  L.  R.  A.  (N.  S.)  429. 

CALIFORNIA.— Niehaus  Bros.  Co.  v.  Contra  Costa  Water  Co., 
159  Cal.  305,  113  Pac.  375,  36  L.  R.  A.  (N.  S.)  1045;  Ukiah  City  v. 
Ukiah  Water  &  Improvement  Co.,  142  Cal.  173,  75  Pac.  773,  64  L.  R. 
A.  231,  100  Am.  St.  107. 

CONNECTICUT.— Nickerson  v.  Bridgeport  Hydraulic  Co.,  46 
Conn.  24,  33  Am.  Rep.  1. 

FEDERAL.— Boston  Safe-Deposit  &  T.  Co.  v.  Salem  Water  Co., 
94  Fed.  238;  Guardian  Trust  &  Deposit  Co.  v.  Greensboro  Water 
Supply  Co.,  115  Fed.  184;  Metropolitan  Trust  Co.  v.  Topeka  Water 
Co.,  132  Fed.  702;  New  Orleans  &  N.  E.  R.  Co.  v.  Meridian  Water- 
works Co.,  72  Fed.  227. 

FLORIDA.— Mugge  v.  Tampa  Waterworks  Co.,  52  Fla.  371,  42 
So.  81,  6  L.  R.  A.  (N.  S.)  1171,  120  Am.  St.  207;  Woodbury  v.  Tampa 
W^aterworks  Co.,  57  Fla.  243,  49  So.  556,  21  L.  R.  A.  (N.  S.)  1034. 

GEORGIA.— Fowler  v.  Athens  City  Waterworks  Co.,  83  Ga.  219,  9 
S.  E.  673,  20  Am.  St.  313. 

IDAHO.— Bush  V.  Artesian  Hot  &  Cold  Water  Co.,  4  Idaho  618. 
43  Pac.  69,  95  Am.  St.  161. 

ILLINOIS.— Galena  v.  Galena  Water  Co.,  132  111.  App.  332;  Galena 
V.  Galena  Water  Co.,  229  111.  128,  82  N.  E.  421. 

INDIANA.— Fitch  v.  Seymour  Water  Co.,  139  Ind.  214,  37  N.  E. 
982,  47  Am.  St.  258. 

IOWA.— Becker  v.  Keokuk  Waterworks,  79  Iowa  419,  44  N.  W. 
694,  18  Am.  St.  377;  Davis  v.  Clinton  Waterworks  Co.,  54  Iowa  59, 
6  N.  W.  126,  37  Am.  Rep.  185. 

KANSAS.— Mott  V.  Cherry  vale  Water  &  Mfg.  Co.,  48  Kans.  12, 
28  Pac.  989,  15  L.  R.  A.  375,  30  Am.  St.  267. 

KENTUCKY.— Graves  County  Water  Co.  v.  Ligon,  112  Ky.  775, 
23  Ky.  L.  2149,  66  S.  W.  725;  Paducah  Lumber  Co.  v.  Paducah  Water 
Supply  Co.,  89  Ky.  340,  12  S.  W.  554,  7  L.  R.  A.  77,  25  Am.  St.  536. 

LOUISIANA.— Allen  &  C.  Mfg.  Co.  v.  Shreveport  Waterworks 
Co.,  113  La.  1091,  37  So.  980,  68  L.  R.  A.  650,  104  Am.  St.  525; 
Planters'  Oil  Mill  v.  Monroe  Waterworks  &  Light  Co.,  52  La.  Ann. 
1243,  27  So.  684. 

MAINE.— Hone  v.  Presque  Isle  Water  Co.,  104  Maine  217,  71  Atl. 
769,  21  L.  R.  A.  (N.  S.)  1021;  Milford  v.  Bangor  R.  &  Electric  Co., 
104  Maine  233,  71  Atl.  759,  30  L.  R.  A.  (N.  S.)  531;  Milford  v.  Bangor 
R.  &  Electric  Co.,  106  Maine  316,  76  Atl.  696,  30  L.  R.  A.  (N.  S.)  526. 

MISSISSIPPI.— Wilkinson  v.  Light,  Heat  &  Water  Co.,  78  Miss. 
389,  28  So.  877. 

MISSOURI.— Howsmon  v.  Trenton  Water  Co.,  119  Mo.  304,  24  S. 
W.  784,  23  L.  R.  A.  146,  41  Am.  St.  654. 


287  LIABILITY   OF   WATER    COMPANIES,  §  237 

§  237.     Liability    to    customer    for    negligence. — A 

number  of  well  reasoned  decisions  from  some  of  our 
strongest  jurisdictions,  including  that  of  the  United 
States  Supreme  Court,  refuse  to  distinguish  between 
the  rights  provided  for  in  the  franchise  or  contract  in 
general,  which  all  courts  recognize  as  being  available 
to  the  individual  inhabitant,  and  the  right  to  an  ade- 
quate water  supply  for  protection  against  fire,  and  hold 
that  there  is  a  liability  to  the  individual  inhabitant, 
who  is  a  consumer  of  water  service,  for  loss  from  fire 
due  to  an  inadequate  water  supply  for  the  same  reason 

NEBRASKA.— Eaton  v.  Fairbury  Waterworks  Co.,  37  Nebr.  546, 
56  N.  W.  201,  21  L.  R.  A.  653,  40  Am.  St.  510. 

NEVADA.— Ferris  v.  Carson  Water  Co.,  16  Nev.  44,  40  Am.  Rep. 
488. 

NEW  JERSEY.— Knappman  Whiting  Co.  v.  Middlesex  Water 
Co.,  64  N.  J.  L.  240,  45  Atl.  692,  49  L.  R.  A.  572,  81  Am.  St.  467; 
Hall  V.  Passaic  Water  Co.  (N.  J.),  85  Atl.  349;  Baum  v.  Somerville 
Water  Co.    (N.  J.),  87  Atl.   140. 

NEW  YORK.— Wainwright  v.  Queens  County  Water  Co.,  28  N. 
Y.  S.  987,  78  Hun  (N.  Y.)  146. 

NORTH  CAROLINA.— Fisher  v.  Greensboro  Water-Supply  Co., 
128  N.  Car.  375,  38  S.  E.  912;  Gorrell  v.  Greensboro  Water-Supply 
Co.,  124  N.  Car.  328,  32  S.  E.  720,  46  L.  R.  A.  513,  70  Am.  St.  598. 

OKLAHOMA.— Lutz  v.  Tahlequah  Water  Co.,  29  Okla.  171,  118 
Pac.  128,  36  L.  R.  A.   (N.  S.)   568. 

PENNSYLVANIA.— Beck  v.  Kittanning  Water  Co.,  8  Sadler 
(Pa.)  237,  11  Atl.  300. 

SOUTH  CAROLINA.— Ancrum  v.  Camden  Water,  L.  &  I.  Co.,  82 
S.  Car.  284,  64  S.  E.  151,  21  L.  R.  A.  (N.  S.)  1029. 

TENNESSEE.— Foster  v.  Lookout  Water  Co.,  3  Lea  (Tenn.)  42; 
Harris  &  Cole  Bros.  v.  Columbia  Water  &  Light  Co.,  114  Tenn.  328, 
85  S.  W.  897. 

TEXAS.— House  v.  Houston  Waterworks  Co.,  88  Tex.  233,  31  S. 
W.  179,  28  L.  R.  A.  532. 

UNITED  STATES.— German  Alliance  Ins.  Co.  v.  Home  Water 
Supply  Co.,  226  U.  S.  220,  57  L.  ed.  — ;  42  L.  R.  A.  (N.  S.)  1000; 
Guardian  Trust  &  Deposit  Co.  v.  Fisher,  200  U.  S.  57,  50  L.  ed.  367. 

WEST  VIRGINIA.— Nichol  v.  HuntlngOn  Water  Co.,  53  W.  Va. 
348,  44  S.  E.  290. 

WISCONSIN.— Britton  v.  Green  Bay,  &c.,  W.  W.  Co.,  81  Wis 
48,  51  N.  W.  84,  29  Am.  St.  856;  Krom  v.  Antigo  Gas  Co.  (Wis.). 
140  N.  W.  41. 


§  238  PUBLIC    UTILITIES.  288 

and  to  the  same  extent  that  there  is  a  Hability  for  the 
failure  to  perform  any  other  pubHc  utility  service;  for 
as  the  court  in  the  case  of  Guardian  Trust  &  Deposit 
Co.  V.  Fisher,  200  U.  S.  57,  50  L.  ed.  367,  decided  in 
1906,  says:  "It  may  also  be  true  that  no  citizen  is  a 
party  to  such  a  contract,  and  has  no  contractual  or 
other  right  to  recover  for  the  failure  of  the  company 
to  act;  but,  if  the  company  proceeds  under  its  con- 
tract, constructs  and  operates  its  plant,  it  enters  upon 
a  public  calling.  It  occupies  the  streets  of  the  city, 
acquires  rights  and  privileges  peculiar  to  itself.  It 
invites  the  citizens,  and  if  they  avail  themselves  of  its 
conveniences,  and  omit  making  other  and  personal  ar- 
rangements for  a  supply  of  water,  then  the  company 
owes  a  duty  to  them  in  the  discharge  of  its  public  call- 
ing, and  a  neglect  by  it  in  the  discharge  of  the  obliga- 
tions imposed  by  its  charter,  or  by  contract  with  the 
city,  may  be  regarded  as  a  breach  of  absolute  duty, 
and  recovery  may  be  had  for  such  neglect.  The  action, 
however,  is  not  one  for  breach  of  contract,  but  for 
negligence  in  the  discharge  of  such  duty  to  the  public, 
and  is  an  action  for  a  tort.  .  .  .  Even  if  the  water 
company  was  under  no  contract  obligations  to  con- 
struct water-works  in  the  city  or  to  supply  the  citizens 
with  water,  yet,  having  undertaken  to  do  so,  it  comes 
under  an  implied  obligation  to  use  reasonable  care; 
and  if,  through  its  negligence,  injury  results  to  an  in- 
dividual, it  becomes  liable  to  him  for  the  damages  re- 
sulting therefrom,  and  the  action  to  recover  is  for  a 
tort,  and  not  for  breach  of  contract." 

§  238.  Recovery  by  consumer  in  contract  or  for 
negligence. — In  recognizing  the  generally  accepted  rule 
that  the  special  rights  and  privileges  granted  the  cor- 
poration permitting  it  to  render  public  utility  service 
are  in  consideration  that  such  service  will  be  rendered 


289  LIABILITY   OF   WATER    COMPANIES.  §  238 

adequately  and  to  all  without  discrimination  in  ac- 
cordance with  the  conditions  stipulated  in  the  fran- 
chise the  court  in  the  case  of  Guardian  Trust  &  De- 
posit Co.  V.  Greensboro  Water  Supply  Co.,  115  Fed. 
184,  decided  in  1902,  held  that  one  of  the  duties  of  a 
water  company  was  to  furnish  an  adequate  supply  of 
water  for  fire  protection  and  said,  as  did  the  Supreme 
Court  of  the  United  States,  that  recovery  could  be 
had  for  such  failure  in  tort  based  on  its  failure  to  per- 
form its  obligation  to  the  public  generally,  including 
the  individual  inhabitants  and  property  owners  who 
constituted  its  customers,  the  court  saying:  "The 
Greensboro  Water  Supply  Company,  as  has  been  seen, 
was  under  the  obligation  of  a  contract  to  furnish  a 
full  supply  of  water  to  the  city  and  its  inhabitants  for 
sundry  purposes,  including  that  of  fire.  And  under 
this  obligation  it  was  its  duty  to  do  so  whenever 
needed.  Besides  this — indeed,  to  facilitate  the  per- 
formance of  this  obligation  and  in  consideration  of 
this  obligation — it  was  clothed  with  valuable  fran- 
chises, under  which  it  used  the  streets  of  the  city  in 
laying  its  mains.  Under  its  obligations,  it  was  to  fur- 
nish the  city  and  its  citizens  with  one  of  the  necessaries 
of  life,  and  was.  bound  to  furnish  all  that  desired  it, 
who  paid  the  price  imposed.  It  served  the  public,  and 
to  this  extent  was  a  quasi  public  corporation,  bound  to 
the  discharge  of  a  public  duty.  Griffin  v.  Water  Co., 
122  N.  Car.  206,  30  S.  E.  319,  41  L.  R.  A.  240;  Coy  v. 
Gas  Co.  (Ind.  Sup.),  36  L.  R.  A.  535  (s.  c.  46  N.  E. 
17).  So  it  was  the  duty  of  the  water  company  to  fur- 
nish the  water  for  fire — a  duty  arising  out  of  an  ex- 
press contract,  and  out  of  the  franchises  granted  to  it 
for  the  purposes  of  public  utility  and  need.  It  did  not 
fulfill  this  duty.  .  .  .  The  only  question  is,  will  an 
action,  as  for  a  tort,  lie  against  a  defendant  who  has 
negligently  performed  an  express  contract?  We  have 
19— Pub.  Ut. 


§  239  PUBLIC    UTILITIES.  29O 

seen  that,  in  entering  into  this  contract,  the  water 
company  assumed  a  duty  to  the  pubHc.  Mr.  Chitty, 
quoted,  supra,  says  that,  under  circumstances  like 
these,  the  plaintiff  may  proceed  either  ex  contractu 
or  ex  delicto.  In  other  words,  the  negligence  in  not 
performing  a  contract  of  this  character,  whereby  prop- 
erty has  been  injured,  is  a  tort,  as  well  as  a  breach  of 
contract,  and  that  on  such  a  tort  action  will  lie." 

§  239.  Recovery  by  consumer  as  taxpayer. — These 
cases  just  mentioned  base  the  liability  on  the  broadest 
possible  ground  permitting  a  recovery  in  tort  by  an 
action  of  any  property  owner  who  has  contracted  for 
a  water  supply  and  they  do  not  limit  the  liability  to 
such  as  was  contemplated  by  the  parties  when  the  con- 
tract was  made,  but  base  it  on  the  general  undertaking 
in  connection  with  the  franchise  grant  itself  to  furnish 
adequate  service  in  accordance  with  its  terms.  The 
case  of  Fisher  v.  Greensboro  Water-Supply  Co.,  128 
N.  Car.  375,  38  S.  E.  912,  decided  in  1901,  is  a  recent 
decision  of  the  Supreme  Court  of  North  Carolina,  from 
whose  jurisdiction  the  former  cases  were  appealed, 
which  permits  recovery  for  fire  loss  due  to  an  inade- 
quate water  supply  at  the  hands  of  an  inhabitant  be- 
cause he  is  a  taxpayer  and  a  property  owner  of  the 
municipality  whose  property  was  destroyed.  In  the 
course  of  its  decision  the  court  said:  "The  plaintiff 
alleges  that  defendant  had  obligated  itself  (among 
other  things)  to  furnish  to  the  city  of  Greensboro  an 
ample  supply  of  water,  and  the  necessary  machinery, 
engines,  appliances,  etc.,  for  protection  against  fire; 
that  he,  an  inhabitant  and  taxpayer  of  said  city,  owned 
the  Benbow  House,  a  four-story  hotel,  there  situate, 
which  was  burned  in  June,  1899,  and  'that  the  defend- 
ant company  was  culpably  negligent  and  wilfully  care- 
less of  its  duty  and  obligations,  both  to  the  city  of 


291  LIABILITY    OF   WATER   COMPANIES.  §  24O 

Greensboro  and  its  inhabitants,  under  the  said  con- 
tract, and  by  virtue,  also,  of  the  duties,  obligations, 
and  responsibilities  which  it  assum'ed  when  it  under- 
took to  supply  water  to  the  city  of  Greensboro  and 
its  inhabitants  for  a  stipulated  price,  which  was  paid 
to  it  by  the  said  city,  and  derived  by  said  city  from 
taxation  on  the  inhabitants  thereof,  and  particularly  on 
the  plaintiff,  a  property  owner,  as  aforesaid,  and  a  tax- 
payer in  the  said  city  of  Greensboro.'  .  .  .  We 
think  the  plaintiff  was  entitled  to  judgment  as  prayed 
for.  There  was  an  express  and  legal  obligation  upon 
the  part  of  the  defendant  to  provide  and  furnish  ample 
protection  against  fires,  and  a  breach  of  that  obliga- 
tion, and  a  consequential  damage  to  the   plaintiff." 

§  240.  Customer  not  municipality  real  party  in  in- 
terest to  contract. — The  same  court  in  the  case  of  Gor- 
rell  V.  Greensboro  Water-Supply  Co.,  124  N.  Car.  328, 
12  S.  E.  720,  46  L.  R.  A.  513,  70  Am.  St.  598,  decided 
in  1899,  in  permitting  a  recovery  for  loss  from  fire  due 
to  an  inadequate  water  supply,  while  admitting  that 
the  individual  sustaining  the  loss  was  not  a  party  to 
the  franchise  contract  nor  privy  to  that  contract,  rec- 
ognized that  he  was  really  the  party  for  whom  the 
contract  was  made  and  the  service  provided,  while  the 
municipality  was  simply  the  nominal  party  acting  in 
effect  for  its  inhabitants  who  were  the  real  parties 
interested  and  the  beneficiaries  of  the  contract,  whose 
money  collected  by  way  of  taxation  and  for  water 
rentals  met  the  expense  and  paid  for  the  service,  and 
in  the  course  of  the  decision  said:  "It  is  true,  the 
plaintiff  is  neither  a  party  nor  privy  to  the  contract, 
but  it  is  impossible  to  read  the  same  without  seeing 
that,  in  warp  and  woof,  in  thread  and  filling,  the  object 
is  the  comfort,  ease,  and  security  from  fire  of  the  peo- 
ple, the  citizens  of  Greensboro.     This  is  alleged  by  the 


§  241  PUBLIC    UTILITIES.  292 

eleventh  paragraph  of  the  complaint,  and  is  admitted 
by  the  demurrer.  The  benefit  to  the  nominal  contract- 
ing party,  the  city  of  Greensboro,  as  a  corporation,  is 
small  in  comparison,  and,  taken  alone,  would  never 
have  justified  the  grants,  concessions,  privileges,  bene- 
fits, and  payments  made  to  the  water  company.  Upon 
the  face  of  the  contract,  the  principal  beneficiaries  of 
the  contract  in  contemplation  of  both  parties  thereto 
were  the  water  company  on  the  one  hand  and  the  in- 
dividual citizens  of  Greensboro  on  the  other.  The 
citizens  were  to  pay  the  taxes  to  fulfill  the  money  con- 
sideration named,  and  furnishing  the  individual  citi- 
zens with  adequate  supply  of  water,  and  the  protec- 
tion of  their  property  from  fire,  was  the  largest  duty 
assumed  by  the  company.  One  not  a  party  or  privy 
to  a  contract,  but  who  is  a  beneficiary  thereof,  is  en- 
titled to  maintain  an  action  for  its  breach." 

§  241.     Customer  party  to  contract  may  recover. — 

While  the  customer  for  water  service  necessarily  as- 
sumes the  risk  of  loss  in  case  the  fire  can  not  be  ex- 
tinguished with  such  a  water  supply  as  is  provided  for 
in  the  franchise,  the  court  in  the  case  of  New  Orleans 
&  N.  E.  R.  Co.  V.  Meridian  Waterworks  Co.,  72  Fed. 
227,  decided  in  1896,  holds  that  the  customer  does  not 
take  the  additional  risk  of  loss  from  fire  due  to  a  fail- 
ure to  furnish  the  supply  of  water  provided  for  in 
the  franchise  and  that  where  the  loss  is  due  to  this 
failure  the  recovery  can  be  had  against  the  water- 
works company  for  its  failure  to  furnish  the  supply 
called  for  by  the  franchise.  The  court  says :  "But 
the  breach  upon  which  the  pleadings  herein  show  this 
action  to  be  founded  occurred  when  the  defendant 
failed  to  furnish  plaintiff's  servants  with  an  adequate 
supply  of  water,  at  not  less  than  sixty  pounds  pressure, 
as  contracted  for;  so  that  such  servants  might,  with 


293  LIABILITY   OF   WATER    COMPANIES.  §  242 

the  use  of  water  under  that  pressure,  have  done  all 
that  was  practicable  to  save  plaintiff's  property.  The 
defendant  agreed  to  furnish  that  pressure  of  water,  as 
the  plaintiff  alleges,  for  fire  purposes;  and  plaintiff 
took  on  itself  the  risk  as  to  the  effectiveness  or  suffi- 
ciency of  water  at  such  a  pressure  to  extinguish  such 
fires  as  might  threaten  said  company's  buildings.  .  .  . 
But  the  plaintiff  had  contracted  for  an  adequate  sup- 
ply of  water  at  such  pressure,  and,  when  the  emer- 
gency came,  the  railway  company  was  entitled,  under 
a  reasonable  condition  of  things,  to  the  use  of  water 
at  that  pressure,  to  aid  its  servants,  to  that  extent, 
to  extinguish  the  fire.  Under  the  pleadings,  plaintiff's 
evidence,  not  objectionable  under  the  well-established 
rules  as  to  the  admissibility  of  evidence,  applicable 
under  such  a  state  of  case,  might  have  authorized  a 
recovery  of  damages." 

§  242.  Water-works  company  not  insurer. — The 
decision  in  the  case  of  Woodbury  v.  Tampa  Water- 
works Co.,  57  Fla.  243,  49  So.  556,  21  L.  R.  A.  (N.  S.) 
1034,  decided  in  1909,  is  similar  to  the  one  last  referred 
to  in  holding  that  the  law  does  not  require  the  water 
company  to  become  an  insurer  of  all  the  property  for 
which  it  contracts  to  furnish  water  service,  but  that 
the  party  whose  property  is  destroyed  because  of  the 
failure  to  furnish  the  service  contracted  for  is  the 
party  really  affected  by  the  failure,  because  it  resulted 
in  his  loss,  for  which  he  is  allowed  a  recovery,  based 
on  the  relation  of  a  customer  thus  established  between 
himself  and  the  company  undertaking  to  furnish  the 
service,  for  as  the  court  says:  "The  duty  the  defend- 
ant owed  to  the  plaintiff  by  virtue  of  the  public  service 
engaged  in  by  the  defendant  was  to  supply  the  hy- 
drants near  the  plaintiff's  property  with  water  as 
legally  required ;   such  water  to  be  used  by  others  in 


S  243  PUBLIC    UTILITIES.  294 

extinguishing  fire  on  the  plaintiff's  premises.  The  law 
imposes  upon  the  defendant  no  duty  to  insure  the 
property  or  to  extinguish  fires.  The  plaintiff  has  no 
right  of  action  for  a  failure  of  the  defendant  to  furnish 
water  where  the  plaintiff's  property  was  not  located, 
if  such  failure  was  not  a  proximate  cause  of  the  burn- 
ing of  the  plaintiff's  property.  .  .  .  The  failure  of 
the  defendant  to  furnish  water  where  the  fire  existed 
before  reaching  the  plaintiff's  property  does  not  ap- 
pear to  be  the  agency  that  proximately  caused  the 
fire  to  destroy  the  plaintiff's  house.  .  .  .  The  de- 
fendant was  not  responsible  for  starting  the  fire,  and 
was  under  no  duty  to  the  plaintiff  to  extinguish  it 
where  it  started;  but  the  primary  duty  of  the  de- 
fendant to  the  plaintiff  was  to  supply  water  as  law- 
fully required  for  extinguishing  the  fire  when  it  reached 
plaintiff's  property.  ...  If  the  defendant  is  respon- 
sible for  the  destruction  of  the  plaintiff's  property, 
there  is  liability;  and  there  can  be  no  doubt  that  the 
plaintiff,  whose  property  was  destroyed,  is  the  real 
party  in  interest,  and  is  the  proper  plaintiff  here.  .  .  . 
When  a  public-service  corporation,  chartered  for  the 
purposes,  exercises  franchises,  and  actually  undertakes, 
for  a  compensation  paid  from  a  special  tax  levy,  to 
render  the  public  service  of  supplying  to  a  city  and 
its  inhabitants  water  adequate  for  all  purposes,  includ- 
ing fire  protection  to  the  property  of  the  city  and  its 
inhabitants,  a  relation  between  the  corporation  and 
the  individual  property  holder  is  thereby  established, 
which,  by  implication  of  law,  imposes  reciprocal  duties 
and  obligations  upon  the  parties." 

§  243.  Duty  under  franchise  to  supply  water. — 
That  recovery  can  be  had  for  negligence  in  failing  to 
discharge  the  duty  of  furnishing  an  adequate  service, 
which  is  a  consideration  for  the  granting  to  the  com- 


295  LIABILITY    OF    WATER   COMPANIES.  §  244 

pany  of  its  franchise  privileges  is  the  effect  of  the  de- 
cision in  the  case  of  Mugge  v.  Tampa  Waterworks 
Co.,  52  Fla.  371,  42  So.  81,  6  L.  R.  A.  (N.  S.)  1171, 
120  Am.  St.  207,  decided  in  1906,  as  stated  in  the  fol- 
lowing language:  "We  are  of  opinion  that  the  de- 
fendant in  error,  enjoying,  as  it  does,  extensive  fran- 
chises and  privileges  under  its  contract,  such  as  the 
exclusive  right  to  furnish  water  to  the  city  and  its  in- 
habitants for  thirty  years,  the  right  to  have  special 
taxes  levied  on  the  property  of  the  citizen  for  its  bene- 
fit, the  right  to  use  the  streets  with  its  mains  and  hy- 
drants, the  right  to  charge  tolls  and  regulate  the  use 
of  water,  not  to  mention  others,  has  assumed  the  pub- 
lic duty  of  furnishing  water  for  extinguishing  fires, 
according  to  the  terms  of  its  contract,  and  that  for 
negligence  in  the  discharge  of  this  duty,  whereby  the 
fire  department,  adequately  equipped  and  prepared, 
was  not  furnished  with  water  according  to  the  contract, 
and  the  property  of  the  property  owner  was,  on  ac- 
count of  such  negligence  in  furnishing  water,  destroy- 
ed, it  is  liable  to  him  for  the  damages  suffered  in  an 
action  of  tort." 

§  244.  Owner  of  property  only  party  who  can  sue 
for  loss. — While  recognizing  that  the  municipal  cor- 
poration is  never  held  liable  to  the  owner  for  the  loss 
of  his  property  from  fire  because  this  is  regarded  as 
a  governmental  duty  of  the  municipality  which  it  may 
or  may  not  perform  as  it  prefers  and  that  the  munici- 
pality can  not  recover  against  the  water  company  for 
a  loss  from  fire  sustained  by  the  individual  inhabitant 
because  it  is  not  the  party  in  interest  which  sustains 
the  loss,  a  recovery  by  the  inhabitant  himself  against 
the  company  is  permitted  and  constitutes  the  only 
means  by  which  a  recovery  can  be  had;  for  as  the 
court    in    the    case    of    Graves    County    Water    Co.    v. 


§  245  PUBLIC    UTILITIES.  296 

Ligon,  112  Ky.  775,  23  Ky.  L.  2149,  66  S.  W.  725,  de- 
cided in  1902,  says:  "On  July  30,  1891,  the  city  of 
Mayfield  made  an  ordinance  providing  for  a  supply  of 
water  and  for  electric  lights  for  the  city,  by  which  it 
granted  to  appellant  the  franchise  of  supplying  the 
city  and  its  inhabitants  with  water  and  electric  lights 
for  a  period  of  25  years,  appellant  to  keep  a  sufficiency 
of  engine  and  boiler  power,  so  that,  if  one  engine  or 
pump  should  get  out  of  fix,  there  would  be  others 
which  might  be  used  for  pumping  water;  all  mains  to 
be  of  suitable  size,  and  to  furnish  an  abundant  supply 
of  water.  .  .  .  On  June  26,  1901,  a  fire  began  in  a 
house  in  the  city,  which  spread  to  and  burned  appel- 
lees' house  from  the  want  of  water  in  the  hydrants, 
there  not  being  sufficient  pressure  to  throw  a  stream 
of  any  size  more  than  from  two  to  five  feet.  There 
was  no  water  in  the  tower,  and  the  firemen  were  un- 
able to  get  water  to  check  the  fire.  By  reason  of  this 
the  fire  spread  to  appellees'  property  and  destroyed 
it.  .  .  .  It  is  universally  held  that  the  city  is  not 
liable  to  the  property  owner  for  the  loss  of  his  prop- 
erty. It  is  equally  clear  that  the  city  can  not  sue  the 
water  company  and  recover  damages  for  the  loss  of 
private  property.  The  result  is  that,  if  the  owner  can 
not  himself  sue  for  the  loss  of  his  property,  he  is  with- 
out redress,  although  his  property  has  been  destroyed 
by  the  breach  of  a  contract  made  for  his  benefit  by 
the  city.     We  are  not  prepared  to  so  hold." 

§  245.  Beneficiary  of  contract  may  sue  for  its 
breach. — The  same  court  in  the  case  of  Paducah  Lum- 
ber Co.  V.  Paducah  Water  Supply  Co.,  89  Ky.,  340,  12 
S.  W.  554,  7  L.  R.  A.  yj,  25  Am.  St.  536,  decided  in 
1889,  in  sustaining  a  recovery  for  such  a  loss  due  to 
the  failure  of  the  water  company  applies  the  principle 
enunciated  in  the  case  of  Lawrence  v.  Fox,  supra,  and 


297  LIABILITY   OF   WATER   COMPANIES.  §  246 

generally  accepted  by  most  of  our  courts  that  a  con- 
tract made  for  the  benefit  of  a  third  person  based  on 
a  good  consideration  is  available  to  that  third  person, 
although  the  consideration  did  not  pass  directly  from 
him  to  the  party  liable  on  the  contract.  To  refuse  re- 
covery and  hold  otherwise,  the  court  observes  would 
render  the  agreement  meaningless  and  of  no  effect  for 
any  purpose,  for  as  the  court  says:  "'But,  we  think, 
if  there  be  in  fact  consideration  for  a  promise  or  en- 
gagement made  for  the  benefit  of  the  person  who  sues, 
it  is  not  essential  for  it  to  have  passed  directly  from 
him  to  the  person  sued.  .  .  .  For  this  court  has 
held  the  doctrine  well  settled  that  a  party  for  whose 
benefit  a  contract  is  evidently  made  may  sue  thereon 
in  his  own  name,  though  the  engagement  be  not  di- 
rectly to  or  with  him.  .  .  .  And  it  being  alleged  in 
the  petition,  and  also,  in  effect,  provided  in  the  ordi- 
nance of  the  city  council  that  contains  the  terms  and 
conditions  of  the  contract,  that  it  was  made  for  the 
benefit  of  the  inhabitants,  it  seems  to  us  that,  if  ap- 
pellee can  be  made  answerable  in  damages  at  all,  it  is 
liable  to  appellant  upon  the  facts  stated  in  the  peti- 
tion. ...  It  seems,  if  the  contract  before  us  is  not 
to  be  treated  as  meaningless  and  totally  ineffectual 
for  every  purpose,  the  parties  to  it  must  be  regarded 
as  having  contemplated  and  assented  to  the  conse- 
quences of  nonperformance,  as  well  as  the  profit  and 
advantage  of  performance,  and  consequently  appellee 
is  liable  in  this  case  for  such  damages  as  its  failure  or 
refusal   to   perform  may  have   caused   to   appellant." 

§  246.     Consideration    furnished    by    beneficiary. — 

After  indicating  that  the  funds  used  in  the  payment  of 
the  water  service  come  directly  from  the  customers 
and  that  the  franchise  rights  are  provided  for  their 
especial  benefit,  the  court  in  the  case  of  Planters'  Oil 


§  247  PUBLIC    UTILITIES.  298 

Mill  V.  Monroe  Waterworks  &  Light  Co.,  52  La.  Ann. 
1243,  27  So.  684,  decided  in  1900,  says:  "Municipali- 
ties are  the  people  acting  in  their  corporate  capacity. 
It  was  the  people's  money  that  was  paid  the  water 
company.  It  was  for  the  benefit  of  the  people  that  the 
promise  was  made  on  part  of  the  company  to  supply 
water  for  extinguishing  fires.  Ostr.  Ins.  §  383.  If  it 
were  to  the  pubHc  that  the  promise  of  the  contract 
was  made,  then  it  was  to  'the  public  as  composed  of 
individual  persons.'  The  municipality  was  but  the 
agent  of  the  public  as  thus  composed.  Its  acts  in  the 
matter  of  the  contract  under  consideration  were 
chiefly  fiduciary.  The  beneficiaries  are  the  corpora- 
tors. It  will  not  do  to  say  the  water  company  owes 
them  no  duty.  While  not  deciding  or  intending  to 
decide  outright  that  plaintiff  is  entitled  to  recover 
against  the  water  company  on  account  of  the  contract 
made  by  the  latter  with  the  city  of  Monroe,  we  are 
yet  of  the  opinion  that,  taking  the  allegations  of  the 
petition  as  true  for  the  purpose  of  the  trial  of  the 
exception,  a  sufficient  legal  cause  of  action  against  the 
company  is  disclosed  to  send  the  case  to  trial  on  its 
merits." 

§  247.  Liability  for  fire  loss  contemplated  by  con- 
tract.— Because  the  contract  itself  provided  for  water 
service  as  a  fire  protection  and  the  parties  to  the  agree- 
ment understood  that  any  damages  resulting  by  fire 
loss  from  a  failure  to  render  adequate  service  would 
constitute  a  material  breach  of  that  contract,  recovery 
for  such  damages  was  sustained  in  the  case  of  Harris 
&  Cole  Bros.  v.  Columbia  Water  &  Light  Co.,  114 
Tenn.  328,  85  S.  W.  897,  decided  in  1905,  where  the 
court  spoke  as  follows:  "The  bill  distinctly  avers  that 
the  defendant  contracted  to  supply  at  all  times  an 
amount  of  water  ample  to  extinguish  fires,  and  failed 


299  LIABILITY   OF    WATER    COMPANIES.  §  248 

to  do  SO,  and  that  this  failure  was  the  occasion  of  the 
loss  sustained  by  complainants.  The  failure  to  fur- 
nish water  did  not  occasion  the  fire,  but  it  is  averred 
that  it  did  bring  about  the  loss  resulting  from  the  fire. 
To  prevent  this  loss  by  supplying  a  quantity  of  water 
sufificient  to  extinguish  any  fire  which  might  occur 
was  within  the  letter  of  the  contract.  .  .  .  It  is  true 
that,  where  an  action  is  brought  to  recover  for  a  breach 
of  a  contract,  'the  contract  itself  must  give  the  meas- 
ure of  damages,'  yet,  in  the  light  of  the  averments  of 
the  bill  in  this  case,  it  was  clearly  within  the  contem- 
plation of  the  parties  to  this  contract  that,  if  it  was 
breached  by  defendants,  then  it  should  furnish  full  in- 
demnity of  the   damages  resulting  from   the  breach." 

§  248.  Contract  expressly  assumes  risk  of  fire  loss. 
— In  an  opinion  basing  recovery  expressly  on  contract, 
the  court  in  the  case  of  Knappman  Whiting  Co.  v.  Mid- 
dlesex Water  Co.,  64  N.  J.  L.  240,  45  Atl.  692,  59  L.  R. 
A.  572,  81  Am.  St.  467,  decided  in  1900,  sustained  a  re- 
covery for  loss  due  to  fire  from  a  failure  to  furnish 
an  adequate  water  supply,  for  as  the  court  said:  "The 
principle  underlying  all  these  cases  is  that  where  the 
contract  is  express,  as  it  is  in  this  case — to  furnish 
water,  with  a  pressure  sufficient  for  fire  purposes — 
to  do  a  thing  not  unlawful,  the  contractor  must  per- 
form it;  and  if,  by  some  unforeseen  accident,  the  per- 
formance is  prevented,  he  must  pay  damages  for  not 
doing  it.  .  .  .  The  water  company  expressly  con- 
tracted to  supply  water  for  fire  purposes.  The  com- 
pany failed  to  do  so,  and  the  premises  of  the  defendant 
took  fire,  occasioning  a  considerable  loss.  Assuming 
that  this  result  was  due  to  the  breaking  of  the  pipes, 
without  any  fault  on  the  part  of  the  water  company, 
we  have  a  loss  to  be  borne  by  one  party  or  the  other. 
In  such  a  condition  of  affairs,  to  adopt  the  language 


§  249  PUBLIC    UTILITIES.  3OO 

of  Mr.  Justice  Whelpley,  'Where  one  of  two  innocent 
persons  must  sustain  a  loss,  the  law  casts  it  upon  him 
who  has  agreed  to  sustain  it,  or,  rather,  the  law  leaves 
it  where  the   agreement   of  the  parties   has  put  it.'  " 

§  249.     Reasons    for   denying   recovery    stated. — In 

opposition  to  the  principle  which  the  above  cases 
enunciate  and  support,  the  following  cases,  including 
that  of  Wainwright  v.  Queens  County  Water  Co.,  28 
N.  Y.  S.  987,  78  Hun  146,  decided  in  1894,  hold  that 
the  public  service  corporation  providing  the  water 
supply  to  a  city  and  its  inhabitants  is  not  liable  to  the 
individual  customer  and  property  owner  whose  prop- 
erty is  destroyed  by  fire  because  of  an  inadequate 
water  supply,  due  to  its  failure  to  provide  water  serv- 
ice in  accordance  with  the  provisions  of  the  franchise. 
While  these  decisions  do  not  agree  as  to  the  reason 
for  so  holding,  the  position  taken  by  most  of  them  is 
that  such  a  liability  was  not  in  the  minds  of  the  parties 
to  the  agreement  and  that  they  did  not  contemplate 
that  such  a  loss  when  sustained  in  this  matter  should 
be  borne  by  the  corporation  failing  to  furnish  ade- 
quate service;  that  the  corporation  is  not  an  insurer 
nor  was  it  intended  by  the  parties  that  it  should  be 
held  liable  to  that  extent;  that  in  case  the  munici- 
pality undertook  to  provide  a  water  supply  for  fire 
protection,  it  would  not  be  liable  for  a  failure  to  fur- 
nish an  adequate  service  for  this  purpose  because  the 
action  would  be  governmental  rather  than  proprietary, 
and  that  therefore  the  private  concern  should  not  be 
held  liable;  and  finally  that  there  is  no  privy  of  con- 
tract or  consideration  between  the  individual  customer 
and  property  owner  and  the  corporation  undertaking 
to  furnish  water  service  to  himself  and  the  other  in- 
habitants of  the  municipality  as  well  as  the  municipal- 
ity itself.     The  New  York  case  just  mentioned  in  re- 


301  LIABILITY    OF   WATER    COMPANIES.  §  25O 

fusing  to  find  a  liability  for  the  destruction  of  property 
by  fire  because  of  an  inadequate  water  supply  is  ma- 
terially limited  in  its  effect,  if  in  fact  it  is  not  over- 
ruled, by  the  more  recent  case  of  Pond  v.  New  Ro- 
chelle  Water  Co.,  supra,  which  has  already  been  dis- 
cussed. The  question  of  the  rights  and  liabilities  of 
the  parties  to  the  contract  is  determined  by  the  con- 
struction of  its  terms  and  conditions  with  a  view  of 
ascertaining  the  intention  of  the  parties  to  it,  and  as 
this  intention  with  reference  to  the  liability  in  question 
is  not  expressed,  the  matter  is  left  open  to  judicial 
conjecture;  and  has  become  a  very  much  disputed 
question  of  fact,  upon  which  the  courts  have  taken 
diametrically    opposite    positions. 

§  250.  Recovery  held  not  in  contemplation  of  par- 
ties.— The  following  language  in  the  decision  of  the 
Wainwright  case  indicates  that  the  court  believed  that 
the  liability  was  not  covered  by  the  contract  nor  con- 
templated by  the  parties  to  it,  which,  of  course,  is 
directly  in  conflict,  both  as  to  the  decision  and  the 
reason  upon  which  it  is  based,  with  the  Knappman 
Whiting  Co.  case  just  discussed:  "I  do  not  see  that 
the  relation  of  the  individual  taxpayer  to  the  company 
that  agrees  to  supply  water  is  any  different  than  it  is 
towards  the  person  who  sells  the  fire  engine  or  the 
hose  to  the  fire  district.  The  power  of  the  district  to 
contract  in  all  cases  is  the  same,  and  derived  from  the 
statute.  But  if,  from  the  bursting  of  a  defective  hose 
or  the  breaking  down  of  a  defective  engine,  the  extin- 
guishment of  a  fire  was  made  impossible,  the  owner 
of  the  destroyed  property  would  have  no  right  of  ac- 
tion against  the  vendor  of  those  appliances.  Privity 
of  contract  is  an  essential  element  to  an  action  founded 
on  a  breach  of  contract,  and,  whether  the  action  for 
damages    resulting   from    the    breach    be    in    form    on 


§  251  PUBLIC    UTILITIES.  302 

contract  or  for  a  wrong,  it  can  only  be  maintained  by 
a  party  to  the  contract." 

§  251.  Recovery  denied  for  want  of  privity  be- 
tween parties. — That  the  weight  of  authority  is  against 
recovery  on  this  HabiHty  for  the  reason  that  there  is 
a  want  of  privity  between  the  customer  and  property 
owner  sustaining  the  loss  and  the  corporation  under- 
taking to  furnish  the  service  is  accurately  stated  in 
the  case  of  Lovejoy  v.  Bessemer  Waterworks  Co.,  146 
Ala.  374,  41  So.  76,  6  L.  R.  A.  (N.  S.)  429,  decided  in 
1906,  where  a  large  number  of  authorities  to  this  ef- 
fect are  cited.  After  expressly  recognizing  "that  the 
absence  of  a  remedy  by  suit  for  damages  for  a  failure 
by  a  water  company  to  furnish  water  for  fire  pur- 
poses, according  to  its  contract  with  a  city,  leaves  the 
subject  'in  an  extremely  unsatisfactory  position,'  "  the 
court  in  this  case  reiterates  the  suggestion  made  in  the 
annotator's  note  to  Britton  v.  Green  Bay  &  Ft.  H. 
Waterworks  Co.,  29  Am.  St.  856,  863,  that  "  'the  only 
security  would  seem  to  be  in  legislation,  or  in  the  in- 
corporation of  some  suitable  provision  in  future  con- 
tracts of  this  description,  wherever  the  taxpayers  de- 
sire to  reserve  a  personal  remedy  against  the  water 
company.'  "  The  court  in  the  course  of  its  decision 
says:  "The  overwhelming  weight  of  authority  is 
against  the  right  of  the  plaintiff  to  maintain  this  ac- 
tion. The  reason  why  he  may  not  do  so  is  that  there 
is  a  want  of  privity  between  him  and  the  defendant 
which  disables  him  either  from  suing  for  a  breach  of 
the  contract  or  for  the  breach  of  duty  growing  out  of 
the  contract.  ...  It  was  furthermore  shown  that 
in  the  cases  where  an  action  had  been  sustained,  when 
instituted  by  a  third  party  upon  a  contract  for  his  ben- 
efit, there  had  been  a  debt  or  duty  owing  by  the  prom- 
isee to  the  party  claiming  the  right  to  sue  upon  the 


303  LIABILITY    OF    WATER   COMPANIES.  §  252 

promise.  It  is  not  claimed  that  the  city  of  Bessemer 
owed  any  duty  to  the  plaintiff  to  furnish  water  for  the 
extinguishment  of  fire,  or  that  an  action  could  have 
been  maintained  against  the  city  for  a  failure  in  that 
regard.  ...  It  suffices  for  all  practical  purposes  of 
this  case  to  say  that  our  own  decisions,  in  which  the 
opinions  were  written  by  as  able  judges  as  ever  occu- 
pied this  bench,  and  in  which  there  was  no  dissent, 
have  rested  the  conclusion  in  similar  cases  involving 
public  contracts  upon  the  declaration  that  there  was 
a  want  of  privity." 

§  252.  No  recovery  not  expressly  provided  for  in 
contract. — In  denying  liability  because  it  was  not  ex- 
pressly provided  for  in  the  contract  which  the  court 
assumed  indicated  that  the  liability  was  not  contem- 
plated by  the  parties,  the  recent  decision  in  the  case 
of  Niehaus  Bros.  Co.  v.  Contra  Costa  Water  Co.,  159 
Cal.  305,  113  Pac.  375,  36  L.  R.  A.  (N.  S.)  1045,  de- 
cided in  1911,  says  that  the  payment  made  for  water 
service  only  includes  water  as  a  commodity  and  that 
the  consideration  would  not  be  adequate  to  cover  the 
liability  for  fire  loss,  the  court  saying:  "While  it  is 
to  be  presumed  that  the  rates  established  by  a  munic- 
ipal ordinance  are  fair  and  reasonable,  this  presump- 
tion only  applies  as  far  as  such  rates  fix  the  compen- 
sation to  be  paid  the  company  for  furnishing  water  to 
consumers  as  a  commodity.  They  are  not  fixed  as 
a  consideration  under  which  the  company  obligates 
itself  to  furnish  water  for  the  extinguishment  of  fires, 
with  a  corresponding  liability  for  failure  to  do  so. 
And  it  is  from  the  fact  that  under  the  ordinary  rela- 
tion of  public  service  corporation  and  consumer  that 
the  only  duty  of  the  company  is  to  furnish  water  as 
a  commodity,  and  not  for  the  purpose  of  extinguish- 
ing fire,  that  liability  for  damages  for  failure  to  supply 


§  253  PUBLIC    UTILITIES.  304 

it  for  the  latter  purpose  can  only  be  created  by  ex- 
press contract.  .  .  .  The  authorities  deny  the  Ha- 
bility,  on  the  ground  that  there  is  no  privity  of  con- 
tract between  property  owners  and  the  water  com- 
pany." 

§  253.  Duty  governmental  and  no  liability. — Be- 
cause the  municipality  in  providing  water  service  for 
fire  protection  by  way  of  contracting  with  a  private 
corporation  for  water  supply  was  regarded  as  acting 
in  its  governmental  capacity  for  the  general  welfare 
and  in  the  discharge  of  a  purely  public  governmental 
duty  for  which  it  could  not  be  held  liable  in  any  event, 
whether  it  attempted  to  perform  the  duty  and  failed 
or  did  not  even  make  the  attempt,  a  private  corpora- 
tion undertaking  to  furnish  the  service  in  place  of  the 
municipality  itself  occupied  the  position  enjoyed  by 
the  city  and  could  not  be  held  liable  to  the  individual 
property  owner  sustaining  a  loss  by  fire  due  to  a  fail- 
ure to  provide  water  service  in  accordance  with  the 
contract,  for  as  the  court  in  the  case  of  Fitch  v.  Sey- 
mour Water  Co.,  139  Ind.,  214,  37  N.  E.  982,  47  Am. 
St.  258,  decided  in  1894,  said:  "Under  the  statute  the 
city  had  a  right  to  enact  an  ordinance  for  protection 
against  fire,  but  it  was  not  bound  to  do  so.  In  enact- 
ing the  ordinance,  the  municipality  moved  in  its  gov- 
ernmental capacity,  in  the  general  interests  of  the 
community.  As  a  means  to  obtain  its  object,  the  city 
contracted  with  the  company  for  a  water  supply.  The 
ordinance,  therefore,  in  so  far  as  the  inhabitants  of 
the  city  and  public  interests  generally  were  concerned, 
was  a  governmental  measure,  which  the  city  might 
take  or  not  take,  as  seemed  best;  and  no  Hability  ex- 
isted against  the  city  for  a  failure  to  enact  the  ordi- 
nance, or  for  a  failure  to  see  that  it  was  duly  enforced. 
There  could,  then,  be  no  public  duty,  under  the  ordi- 


305  LIABILITY   OF   WATER    COMPANIES.  §  254 

nance,  the  violation  of  which  would  render  the  city, 
or  those  appointed  to  carry  out  the  provisions  of  the 
ordinance,  liable  to  any  one  who  might  suffer.  .  .  . 
But,  while  the  inhabitants  were  interested  in  the  con- 
tract made  for  their  benefit,  we  do  not  think  that  this 
interest  was  such  as  gave  the  inhabitants  the  right  to 
sue  for  its  enforcement,  or  for  damages  occasioned 
by  a  failure  to  enforce  it.  .  .  .  There  being  no 
ground  for  recovery,  treating  the  action  as  one  ex 
contractu,  is  it  better  founded  treating  it  as  one  ex 
delicto?  We  think  not.  The  violation  of  a  contract 
entered  into  with  the  public,  the  breach  being  by  mere 
omission  or  nonfeasance,  is  no  tort,  direct  or  indirect, 
to  the  private  property  of  an  individual,  though  he  be 
a  member  of  the  community,  and  a  taxpayer  to  the 
government.  Unless  made  so  by  statute,  a  city  is  not 
liable  for  failing  to  protect  the  inhabitants  against  the 
destruction  of  property  by  fire." 

§  254.  Water-works  company  subrogated  for  mu- 
nicipality.— The  more  recent  case  of  Nichol  v.  Hun- 
tington Water  Co.,  53  W.  Va.  348,  44  S.  E.  290,  de- 
cided in  1903,  "holds  that  a  municipal  corporation  is 
not  bound  to  furnish  protection  from  fire,  and  that, 
when  authorized  so  to  do  by  legislative  act,  it  has 
discretion  to  omit  the  exercise  of  that  power,  and 
there  is  no  duty  resting  upon  it  which  may  form  the 
basis  of  a  contract  between  the  corporation  and  the 
citizen  who  owns  property.  This  is  the  position  taken 
by  the  great  majority  of  the  courts  which  have  passed 
upon  the  question.  This  principle  governs  also  the 
relation  of  a  private  or  quasi  public  corporation  to- 
ward the  citizens  and  property  owners  of  the  city  in 
which,  under  a  contract  wnth  the  city,  it  undertakes 
to  furnish  water  for  protection  against  fire,  in  consid- 

ao— Pub.  ut. 


§  255  PUBLIC    UTILITIES.  306 

eration    of    the    payment    by    the    city    of    an    annual 
rental." 


§  255.  Recovery  denied,  although  expressly  stipu- 
lated by  contract. — In  the  case  of  Mott  v.  Cherryvale 
Water  &  Mfg.  Co.,  48  Kans.  12,  28  Pac.  989,  15  L.  R. 
A-  375>  30  Am.  St.  267,  decided  in  1892,  the  defendant 
water  company,  in  accordance  with  the  ordinance, 
undertook  "that  it  would  pay  all  damages  that  might 
accrue  to  any  citizen  of  the  city  by  reason  of  a  failure 
on  the  part  of  defendant  to  supply  a  sufificient  amount 
of  water,  or  a  failure  to  supply  the  same  at  the  proper 
time,  or  by  reason  of  any  negligence  of  the  defend- 
ant." In  spite  of  this  express  undertaking  the  court 
decided  that  as  the  city  is  not  liable  for  the  failure  of 
the  company  to  furnish  an  adequate  water  service  or 
for  the  performance  of  the  conditions  of  the  contract, 
the  water  company  is  not  liable  on  such  a  contract, 
for  the  contract  is  between  the  city  and  the  water 
company.  This  case  is  a  striking  illustration  of  a 
contract  upon  which  no  recovery  can  be  had  by  the 
municipality  which  is  a  party  to  it  because  its  prop- 
erty is  not  destroyed,  nor  by  the  customer  and  indi- 
vidual property  owner  who  pays  for  water  service  and 
whose  property  is  destroyed,  which  contract  was  en- 
tered into  by  parties  competent  to  make  it  and  for  a 
valid  consideration,  which  expressly  provides  for  the 
supplying  of  a  sufficient  amount  of  water  and  for  a 
liability  for  the  failure  to  furnish  such  a  supply.  In 
the  course  of  its  decision  the  court  says:  "Under  the 
powers  conferred  by  the  statute  upon  cities  in  this 
state  a  city  making  a  contract  with  a  water  company 
to  furnish  water  for  fires,  etc.,  is  not  liable  to  its  citi- 
zens or  residents  on  account  of  the  failure  of  the  com- 
pany to  furnish  water  or  to  perform  the  conditions 
of  the  contract.     If  a  city  is  not  liable  to  its  citizens 


307  LIABILITY    OF    WATER    COMPANIES.  §  256 

or  residents,  the  water  company  is  not  liable  to  such 
citizens  or  residents  upon  a  contract  between  it  and 
the  city.  The  contract,  in  such  a  case,  is  between  the 
city  and  the  water  company  only.  .  .  .  This  action 
is  not  based  upon  a  breach  of  a  statutory  duty,  but 
upon  the  failure  of  the  water  and  manufacturing  com- 
pany to  comply  with  a  contract  made  with  the  city  of 
Ottawa." 

§  256.  No  recovery  contemplated  in  fixing  rates. 
— The  recent  case  of  Lutz  v.  Tahlequah  Water  Co., 
29  Okla.  171,  118  Pac.  128,  36  L.  R.  A.  (N.  S.)  568, 
decided  in  1911,  refuses  recovery  for  the  equitable  rea- 
son stated  that  the  large  investment  necessary  to  estab- 
lish a  water  plant  had  been  made  with  the  understand- 
ing, from  the  majority  of  the  cases,  that  it  would  not 
be  subjected  to  this  liability.  Nor  is  this  an  unrea- 
sonable application  of  the  doctrine  of  stare  decisis, 
which,  while  most  frequently  applied  to  the  law  affect- 
ing title  to  real  estate  and  for  the  purpose  of  protect- 
ing and  conserving  vested  interests,  is  also  fairly  ap- 
plicable to  the  case  in  point,  for  when  such  an  invest- 
ment has  been  made  on  this  understanding  of  the  prin- 
ciple and  the  rates  for  the  service  have  been  fixed 
without  including  this  liability  as  an  obligation  in  con- 
nection with  the  service,  it  would  obviously  be  a  hard- 
ship and  the  taking  of  an  unfair  advantage  to  subject 
the  company  to  such  a  liability,  for  as  the  court  in  the 
case  observes:  "From  the  foregoing  it  will  be  seen 
that  we  are  unable  to  concur  with  the  counsel  in  his 
strictures  upon  following  the  weight  of  authority  in 
this  case.  Nor  in  so  doing  do  we  feel  that  an  injus- 
tice is  being  done  the  litigants,  but  rather  that  the 
contract  made  and  the  obligations  created  by  the  law, 
which  existed  before  and  at  the  time  of  the  occurrence 
out   of  which   this   controversy   has   arisen,    are   being 


§  257  PUBLIC    UTILITIES.  308 

observed  and  carried  out.  When  the  water  company 
came  to  estabHsh  itself  at  Tahlequah,  and  when  the 
parties  invested  their  funds  therein  and  took  upon 
themselves  the  burdens  involved,  it  must  be  assumed 
from  the  character  of  the  project  and  the  large  in- 
vestment necessarily  involved  that  they  were  aware 
that  the  great  weight  of  judicial  opinion  in  the  United 
States  was  that,  in  the  event  of  a  failure  on  the  part 
of  the  company  to  supply  water  on  the  occasion  of  the 
destruction  of  some  taxpayer's  property,  that  it  would 
not  be  liable  to  him  for  the  damages.  ...  In  fol- 
lowing in  this  case,  as  we  do,  that  which  is  the  set- 
tled judgment  of  very  nearly  all  courts  of  last  resort, 
English,  Federal,  and  state,  we  do  so  with  the  abid- 
ing conviction  that  it  is  the  law,  and  is  correctly  de- 
clared." 

§  257.  Impracticable  to  permit  recovery. — This 
point  is  brought  out  to  better  advantage  in  the  rea- 
soning of  the  court  in  the  case  of  Ancrum  v.  Camden 
Water,  L.  &  I.  Co.,  82  S.  Car.  284,  64  S.  E.  151,  21 
L.  R.  A.  (N.  S.)  1029,  decided  in  1909,  where  the 
court  held  that  the  liabilities  of  the  parties  are  limited 
by  the  express  terms  of  the  contract;  and  as  the  de- 
fendant company  did  not  contract  expressly  to  pay 
the  losses  by  fire,  although  they  might  have  been  pre- 
vented if  it  had  not  neglected  to  furnish  an  adequate 
supply  of  water,  it  was  accordingly  not  liable  for  such 
losses,  for  as  the  court  says:  "There  is,  at  least,  a 
strong  presumption  against  a  municipality  undertak- 
ing to  pay  for  such  indemnity  from  the  public  rev- 
enue. .  .  .  That  a  water  company,  assuming  such 
liabilities,  would  have  to  demand  very  large  compen- 
sation to  have  any  profit,  or  even  to  save  itself  from 
bankruptcy,  is  most  obvious.  When  it  is  asserted 
that  a  city  has  undertaken  to  pay  for  such  indemnity 


309  LIABILITY    OF    WATER   COMPANIES.  §  258 

to  its  individual  inhabitants,  and  that  the  water  com- 
pany has  assumed  it,  the  contract  rehed  on  ought  to 
show  clearly  that  such  payment  by  the  city  and  in- 
demnity by  the  water  company  were  intended.  The 
contract  now  under  consideration  contains  no  direct 
undertaking  to  respond  to  the  individual  inhabitant 
for  fire  loss." 

§  258.  Liability  would  require  prohibitive  rates. — 
Because  the  liability  for  loss  by  fire  would  be  so  great 
a  burden  to  the  corporation  undertaking  to  furnish 
water  service  that  it  would  make  the  rates  for  such 
service  for  its  ordinary  use  as  a  commodity  excessive 
and  to  many  prohibitive,  the  court  in  the  case  of  Hone 
V.  Presque  Isle  Water  Co.,  104  Maine  217,  71  Atl.  769, 
21  L.  R.  A.  (N.  S.)  1021,  decided  in  1908,  refuses  to 
permit  recovery  on  such  a  liability,  for  as  the  court 
said:  "If  now,  instead  of  maintaining  a  system  of 
waterworks  of  its  own  for  the  purpose  of  supplying 
water  for  the  extinguishment  of  fires,  a  municipal  cor- 
poration contracts  with  a  water  company  to  furnish 
water  for  that  purpose,  the  numerous  decisions  of  the 
courts  of  last  resort  in  other  states  and  in  the  Federal 
courts,  as  before  indicated,  are  practically  unanimous 
in  holding  that  the  water  company  is  not  liable  to  the 
individual  owner  of  property  which  has  been  destroyed 
by  fire  by  reason  of  the  company's  failure  to  furnish 
an  adequate  supply  of  water  to  extinguish  fires.  .  .  . 
But  the  proposition  advanced  by  the  plaintiffs  would 
require  water  companies  to  assume,  to  some  extent, 
the  responsibility  of  insurers;  and  it  does  not  satisfac- 
torily appear  that  such  a  doctrine  would  be  more  in 
harmony  with  considerations  of  public  policy,  or  more 
consonant  with  reason  and  justice,  than  the  estab- 
lished rule.  Ample  opportunities  are  already  afforded 
for   all    property   owners    to   obtain   insurance    against 


S  259  PUBLIC    UTILITIES.  3 10 

losses  by  fire,  and  the  assumption  of  such  risks  by 
water  companies,  even  in  a  modified  degree,  would 
result  in  double  insurance,  and  largely  increase  water 
rates." 

§  259.  Contract  only  with  municipality  to  furnish 
water  for  fire  protection. — The  court  in  the  case  of 
Britton  v.  Green  Bay,  &c.,  W.  W.  Co.,  8i  Wis.  48,  51 
N.  W.  84,  29  Am.  St.  856,  decided  in  1892,  refuses 
recovery  in  a  similar  case  because  there  was  no  con- 
tractual relation  between  the  parties,  and  as  the  mu- 
nicipality could  not  be  held  liable  on  a  similar  under- 
taking, the  corporation  agreeing  to  render  service 
under  a  contract  with  the  municipality  is  not  liable, 
for  the  duty  to  furnish  fire  protection  still  remained 
with  the  municipality  and  could  not  be  shifted,  and 
the  only  liabiHty  of  the  water  company  under  its  con- 
tract was  with  the  city,  for  as  the  court  said:  "It  is 
not  that  the  company  shall  supply  the  city  and  the 
inhabitants  thereof  with  water  jointly  and  for  the 
same  purposes  and  uses.  The  city  and  the  inhabitants 
are  by  this  general  language  joined  together,  but  it  is 
followed  by  distributive  uses  and  purposes  appropriate 
to  each — to  the  city  for  public  uses  and  consumption 
and  for  putting  out  fires,  and  to  the  inhabitants  for 
private  use  and  consumption,  .  .  .  This  is  in  ac- 
cordance with  the  gravamen  of  the  complaint,  that 
the  defendant  company  neglected  to  furnish  the  city 
water  to  put  out  the  fire  that  consumed  the  plaintiff's 
property,  and  that  the  fire  department  of  said  city 
would  have  extinguished  and  prevented  the  spread 
of  the  fire  but  for  the  negligence  and  carelessness  of 
the  defendant.  It  is  too  plain  for  argument  that  the 
plaintiff  has  no  contractual  relations  with  the  defend- 
ant in  respect  to  being  supplied  with  water  to  be  used 
in  putting  out  this  fire.     .     .     .     This  courf  has  held 


311  LIABILITY   OF   WATER    COMPANIES.  §  260 

that  the  city  itself  would  not  be  liable  in  such  a  case, 
even  on  the  strength  of  its  duty  to  the  public.  Hayes 
V.  Oshkosh,  33  Wis.  314,  14  Am.  Rep.  760.  Could  the 
defendant  have  reasonably  supposed  that  by  this  con- 
tract with  the  city  it  was  contracting  with  or  incur- 
ring liability  to  each  one  of  its  inhabitants,  and  that 
it  might  be  sued  by  each  one  individually  and  sep- 
arately? If  one  enters  into  a  contract  with  another, 
must  he  look  to  see  who  else  might  possibly  in  some 
way  be  remotely  interested  in  it  and  injured  by  its 
breach?  There  would  be  no  end  to  such  a  liability. 
.  .  .  Is  it  a  hardship  that  the  plaintiff  can  not  re- 
cover in  such  a  case?  So  it  is  in  case  the  city  is  sued 
for  the  neglect  of  its  duty  in  not  furnishing  the  neces- 
sary machinery  for  putting  out  fires.  It  is  no  greater 
hardship  in  one  case  than  in  the  other.  The  duty  of 
furnishing  water  and  using  it  to  put  out  fires  still  re- 
mains in  the  city.  That  duty  has  not  been,  if  it  could 
be,  transferred  to  the  company.  The  company  is 
bound  only  by  its  contract,  and  liable  to  the  city  alone, 
as  the  other  contracting  party,   on   the  contract." 

§  260.  Express  contract  for  water  service  for  fire 
protection  necessary. — The  court  in  the  case  of  Ukiah 
City  V.  Ukiah  Water  &  Improvement  Co.,  142  Cal. 
173'  75  P^c.  773,  64  L.  R.  A.  231,  100  Am.  St.  107, 
decided  in  1904,  recognized  that  where  the  corporation 
contracted  expressly  for  the  furnishing  of  water  serv- 
ice for  fire  protection  either  with  an  individual  prop- 
erty owner  or  the  municipality  itself,  it  would  be  held 
liable  for  failure  to  furnish  such  service  where  this 
resulted  in  a  fire  loss,  but  held,  however,  that  a  con- 
tract must  expressly  provide  for  this  service,  the  court 
saying:  "Doubtless  a  water  company  may  so  bind 
itself  by  contract  with  a  person  to  furnish  him  water 
for  the  extinguishment  of  fires  as  to  render  itself  lia- 


§  26l  PUBLIC    UTILITIES.  312 

ble  for  the  value  of  property  of  such  person  destroyed 
by  fire  by  reason  of  its  failure  to  furnish  him  a  suffi- 
cient supply  of  water.  See  N.  O.  &  N.  E.  R.  R.  Co. 
V.  Water  Works  Co.,  y2.  Fed.  227;  Knappman  Co.  v. 
Water  Co.  (N.  J.  Err.  &  App.),  45  Atl.  692,  49  L.  R. 
A.  572,  25  Am.  St.  536;  Paducah  L.  Co.  v.  Water 
Supply  Co.,  89  Ky.  340,  12  S.  W.  554,  13  S.  W.  249, 
7  L.  R.  A.  yj.  It  may  be  assumed  here  that  it  is 
within  the  power  of  a  municipality,  as  a  property 
owner,  to  enter  into  such  a  contract  with  a  water  com- 
pany for  the  protection  of  the  property  which  it  owns 
as  a  legal  individual;  but  it  certainly  needs  something 
more  than  evidence  showing  an  accepted  service  for 
general  fire  purposes  to  establish  such  a  contract,  and 
the  evidence  here  shows  nothing  more." 

§  261.  Rate  for  service  indicates  no  liability  for  fire 
loss  contemplated. — Another  practical  application  of 
this  rule  based  on  the  reason  that  such  a  liability  was 
not  contemplated  by  the  parties  in  making  the  con- 
tract is  furnished  by  the  case  of  Milford  v.  Bangor  R. 
&  Electric  Co.,  106  Maine  316,  76  Atl.  696,  30  L.  R. 
A.  (N.  S.)  526,  decided  in  1909,  where  the  court  re- 
fused to  sustain  the  liability  in  favor  of  the  munici- 
pality for  loss  of  its  own  property  by  saying:  "It 
certainly  can  not  be  reasonably  claimed  that,  for  the 
moderate  consideration  received  by  a  water  company 
under  such  a  contract  as  the  one  actually  made  in  the 
case  at  bar,  it  was  within  the  contemplation  of  both 
parties  that  the  water  company  had  undertaken  to 
make  good  the  loss  which  would  result  from  the  de- 
struction of  the  plaintiffs'  property  by  fire.  It  is  the 
opinion  of  the  court  that  the  legal  effect  of  the  con- 
tract in  this  case  can  not  be  distinguished  in  any  es- 
sential particular  from  that  considered  in  Ukiah  City 
V.  Ukiah  Water  &  Improvement  Co.,  supra,  and  that 


313  LIABILITY   OF    WATER    COMPANIES.  §  262 

the  verdict  of  the  jury  in  this  case,  being  against  the 
law,  can  not  be  sustained." 

This  same  court,  however,  in  a  former  opinion  of 
the  case  of  Milford  v.  Bangor  R.  &  Electric  Co.,  104 
Maine,  233,  71  Atl.  759,  30  L.  R.  A.  (N.  S.)  531,  de- 
cided in  1908,  said:  "But  the  demurrer  admits  the 
truth  of  the  plaintiffs'  allegations  that  the  defendant 
'wrongfully,  carelessly  and  negligently  suffered  and 
allowed  the  mains,  pipes,  and  hydrants  to  be  destitute 
of  any  current  of  water  of  sufficient  pressure,  force, 
and  volume  to  be  of  any  value  or  utility  in  extinguish- 
ing said  fire,  or  any  fire.'  And  the  plaintiffs  aver  that 
the  'sole  cause  of  the  said  loss  and  damage  was  the 
wrongful  neglect  of  duty  of  said  defendant.'  .  .  . 
The  conclusion  is  irresistible  that,  upon  proof  of  the 
facts  stated  in  the  declaration,  the  defendant  would 
be  liable  to  the  plaintiffs,  in  an  appropriate  action,  for 
the  damages  caused  by  its  negligence,  in  failing  to 
perform  a  duty  arising  from  its  contractual  relations 
with  the  plaintiffs." 

§  262.  Interest  of  taxpayer  and  consumer  in  con- 
tract only  incidental. — The  last  decision  and  one  of  the 
strongest  expressions  of  the  rule  denying  recovery  to 
an  insurance  company  which,  having  paid  the  loss, 
was  subrogated  in  the  place  of  the  owner  in  an  action 
for  damages  due  to  a  fire  loss  against  the  water-works 
company  failing  to  furnish  an  adequate  water  supply, 
is  furnished  in  the  case  of  German  Alliance  Ins.  Co. 
V.  Home  Water  Supply  Co.,  226  U.  S.  220  57  L.  ed. — 
decided  December  2,  1912,  where  the  court  said: 
"From  them  it  appears  that  the  majority  of  Amer- 
ican courts  hold  that  the  taxpayer  has  no  direct  in- 
terest in  such  agreements,  and  therefore  can  not 
sue  ex  contractu.  Neither  can  he  sue  in  tort,  be- 
cause   in    the    absence    of    a    contract    obligation    to 


§  263  PUBLIC    UTILITIES.  3I4 

him,  the  water  company  owes  him  no  duty  for  the 
breach  of  which  he  can  maintain  an  action  ex  deHcto. 
A  different  conclusion  is  reached  by  the  Supreme 
Courts  of  three  states,  in  cases  cited  and  discussed 
in  Mugge  v.  Tampa  Waterworks  Co.,  52  Fla.  371,  6 
L.  R.  A.  (N.  S.)  1 171,  120  Am.  St.  207,  42  So.  81. 
They  hold  that  such  a  contract  is  for  the  benefit  of 
taxpayers,  who  may  sue  either  for  its  breach,  or  for 
a  violation  of  the  public  duty  which  was  thereby  as- 
sumed. .  .  .  Here  the  city  was  under  no  obliga- 
tion to  furnish  the  manufacturing  company  with  fire 
protection,  and  this  agreement  was  not  made  to  pay 
a  debt  or  discharge  a  duty  to  the  Spartan  Mills,  but, 
like  other  municipal  contracts,  was  made  by  Spartan- 
burg in  its  corporate  capacity,  for  its  corporate  ad- 
vantage, and  for  the  benefit  of  the  inhabitants  col- 
lectively. The  interest  which  each  taxpayer  had 
therein  was  indirect — that  incidental  benefit  only  which 
every  citizen  has  in  the  performance  of  every  other 
contract  made  by  and  with  the  government  under 
which  he  lives,  but  for  the  breach  of  which  he  has  no 
private  right  of  action." 

§  263.  Recovery  only  by  party  to  contract  ex- 
pressly stipulated. — Where  the  contract  therefore  is 
made  directly  with  the  party  suffering  the  loss  from 
fire  due  to  an  inadequate  water  service,  and  where  it 
expressly  covers  liability  for  such  loss,  and  is  not 
merely  an  agreement  in  general  terms  to  furnish 
water  for  general  fire  purposes,  there  may  be  recovery 
for  such  loss  by  the  party  sustaining  it,  whether  an 
individual  inhabitant  or  the  municipality  itself,  be- 
cause the  parties  to  the  agreement  intended  their  con- 
tract to  cover  such  a  liability.  In  the  case  of  Galena 
V.  Galena  Water  Co.,  132  111.  App.  332,  the  action  was 
brought  by  the  municipality  and  the  school  directors 


315  LIABILITY    OF    WATER    COMPANIES.  §  263 

of  a  school  district  within  the  municipality  to  recover 
damages  for  the  loss  from  fire  sustained  by  the  school 
building,  due  to  a  negligent  breach  of  the  contract  by 
the  defendant  to  furnish  proper  water  protection.  The 
second  section  of  the  ordinance  providing  for  the 
water  supply  from  the  defendant  company  to  the  mu- 
nicipality and  its  inhabitants  provided  that  "the  water 
supplied  by  said  works  shall  be  good,  clear  water,  of 
sufificient  quantity  for  all  domestic,  fire  and  manufac- 
turing purposes  within  said  city  and  suitable  for  those 
purposes,"  and  a  later  section  specifically  provided  for 
the  pressure  and  capacity  of  the  service  and  for  the 
erection  of  a  water  standpipe  and  other  fixtures  nec- 
essary to  secure  such  pressure  as  a  protection  against 
loss  by  fire.  It  was  alleged  in  the  case  that  the  pro- 
tection from  fire  loss  furnished  by  the  fire  department 
was  adequate,  but  that  the  fire  could  not  be  extin- 
guished because  of  the  failure  of  the  defendant  to  fur- 
nish a  sufficient  supply  of  water  for  that  purpose  in 
accordance  with  the  provision  of  its  undertaking  as 
stipulated  in  the  ordinance.  In  the  course  of  its  opin- 
ion the  court  observed:  "If,  as  alleged  in  the  decla- 
ration, the  water  company  failed  to  perform  these  pro- 
visions of  the  contract,  and  if  that  failure  caused  a  loss 
by  fire  to  property  owned  by  the  city,  we  see  no  good 
reason  why  the  water  company  should  not  be  respon- 
sible to  the  city,  one  of  the  parties  to  the  contract, 
for  the  proximate  results  of  such  breach  of  contract." 
In  this  case  on  appeal  to  the  Supreme  Court  of 
Illinois,  as  reported  in  229  111.  128,  82  N.  E,  421,  de- 
cided in  1907,  the  court  observed  that:  "Only  one 
state,  California  (Town  of  Ukiah  City  v.  Ukiah  Water 
&  Improvement  Co.,  142  Cal.  173,  75  Pac.  773.  64  L. 
R.  A.  233.  100  Am.  St.  107),  has  passed  upon  the  right 
of  a  city  to  maintain  an  action  against  a  private  party 
or  corporation  with  whom  it  has   contracted   for  the 


I  263  PUBLIC    UTILITIES.  316 

construction  and  operation  of  water-works  for  the  city 
and  its  inhabitants,  to  recover  of  the  water  company 
for  a  destruction  of  the  city's  property  caused  by  a 
failure  of  the  water  company  to  furnish  a  sufficient 
supply  of  water."  The  court,  however,  did  not  decide 
the  case  on  its  merits  for  the  reason  that  there  was  a 
misjoinder  of  the  municipality  and  the  school  direct- 
ors, it  appearing  that  the  title  to  the  building  was 
owned  by  the  municipality  and  only  controlled  and 
managed  by  the  school  directors,  who  were  accord- 
ingly improperly  joined  as  parties  plaintiff  in  the  case. 


CHAPTER  XV. 

NEGLIGENCE    OF    MUNICIPAL   PUBLIC 
UTILITIES. 

Section. 

264.  General  liability  for  negligence. 

265.  Municipality  liable   for   negligence   except   where   act   govern- 

mental. 

266.  Municipality  not  liable  in  providing  fire  protection. 

267.  Municipality  liable  in  furnishing  water  privately. 
26S.  The  two  capacities  of  municipal  corporations. 

269.  Liability  under  municipal  ownership. 

270.  Liability  under  commission. 

271.  Municipality  liable  for  damage  from  broken  water  main. 

272.  Municipality  liable  for  water-works  same  as  for  streets. 

273.  No  liability  under  statute  where  duty  partly  governmental. 

274.  No  liability  for   public   duty   which   is   not   commercial   enter- 

prise. 

275.  Liability  for  negligent  maintenance  of  water-works  property. 

276.  Liable  only  for  ordinary  use  of  water. 

§  264.  General  liability  for  negligence. — With  the 
exception  of  that  class  of  cases  concerned  with  the 
furnishing  of  a  water  supply  for  protection  against 
fire  loss,  which  is  discussed  in  the  preceding  chapter, 
corporations  providing  municipal  public  utility  service, 
including  municipal  corporations,  are  liable  for  injuries 
sustained  from  negligence  in  the  operation  of  their 
plant  in  furnishing  such  service;  and  all  such  corpora- 
tions, including  municipalities,  are  liable  for  their  neg- 
ligence to  the  same  extent  and  for  the  same  reason 
that  any  individual  or  corporation  is  liable  for  injuries 
resulting  from  negligence  except  in  those  cases  where 
the  municipal  corporation  acts  in  its  public  govern- 
mental capacity.  This  distinction  between  the  capac- 
317 


§  265  PUBLIC    UTILITIES.  318 

ity  of  a  municipal  corporation,  while  acting  in  its  pub- 
lic or  governmental  capacity  on  the  one  hand,  and  in 
its  private  proprietary  and  commercial  capacity  on 
the  other,  which  was  discussed  at  the  beginning  of 
this  treatise,  must  be  kept  in  mind  in  this  connection 
in  order  to  determine  the  nature  and  the  extent  of  the 
liability  of  the  municipality  for  negligence. 

§  265.  Municipality  liable  for  negligence  except 
where  act  governmental. — In  the  preservation  of  the 
public  peace,  the  administration  of  justice,  in  attending 
to  the  public  health  and  education  and  in  providing 
protection  against  fire,  the  municipality  acts  as  an 
agent  of  the  state  in  the  exercise  of  its  public  govern- 
mental power  and  is  subject  to  the  absolute  control  of 
the  state  and  is  not  liable  for  injuries  or  loss  sustained 
resulting  from  its  negligence  in  the  performance  of 
such  duties  nor  for  its  failure  to  perform  them.  In 
the  erection  and  operation  of  gas  works,  water-works, 
electric  light  plants — in  fact,  in  the  providing  of  any 
municipal  public  utility  service  for  the  special  benefit 
and  advantage  of  the  municipality  and  its  citizens,  the 
municipal  corporation  acts  as  a  business  concern  and 
is  liable  in  the  same  way  and  to  the  same  extent  as 
a  private  individual  or  corporation  in  rendering  such 
service.  Although  the  question  of  the  liability  of  mu- 
nicipal corporations  for  the  negligent  operation  of 
their  municipal  public  utility  plants  has  not  been  di- 
rectly decided  in  many  cases,  it  is  well  established 
that  in  the  ownership  and  operation  of  such  systems 
and  in  the  providing  of  their  service  for  the  individual 
inhabitants  as  well  as  for  municipal  purposes,  the 
municipality  is  not  performing  a  public  governmental 
duty,  but  is  acting  in  its  private  business  capacity  in 
the  carrying  on  of  a  business  enterprise  for  the  bene- 
fit of  its  inhabitants  and  for  profit  and  service  to  it- 


319  NEGLIGENCE.  §265 

self,  and  is  subject  to  the  same  liability  as  a  private 
undertaking  organized  for  the  purpose.^ 

1  CALIFORNIA.— Davoust  v.  Alameda,  149  Cal.  69,  84  Pac.  760, 
Cal.  453;  Yik  Hon  v.  Spring  Valley  Waterworks,  65  Cal.  619,  4  Pac. 
5  L.  R.  A.  (N.  S.)  536;  San  Francisco  Gas  Co.  v.  San  Francisco,  9 
666. 

CONNECTICUT.— Hourigan  v.  Norwich,  77  Conn.  358,  59  All. 
487;  Judson  v.  Winsted,  80  Conn.  384,  68  Atl.  999,  15  L.  R.  A.  (N.  S.) 
91. 

FEDERAL.— Guardian  Trust  &  Deposit  Co.  v.  Greensboro  Water 
Supply  Co.,  115  Fed.  184;  Winona  v.  Botzet,  169  Fed.  321,  23  L.  R. 
A.  (N.  S.)  204. 

GEORGIA.— Augusta  v.  Mackey,  113  Ga.  64,  38  S.  E.  339;  Brown 
V.  Atlanta,  66  Ga.  71;  Freeman  v.  Macon  Gas  Light  &  W.  Co.,  126 
Ga.  843,  56  S.  E.  61,  7  L.  R.  A.  (N.  S.)  917;  Love  v.  Atlanta,  95  Ga. 
129,  22  S.  E.  29,  51  Am.  St.  64. 

IDAHO.— Eaton  v.  Weiser,  12  Idaho  544,  86  Pac.  541,  118  Am. 
St.  225. 

ILLINOIS.— Chicago  v.  Selz,  &c.,  Co.,  202  111.  545,  67  N.  E.  386; 
Palestine  v.  Siler,  225  111.  630,  80  N.  E.  345. 

INDIANA.— Aiken  v.  Columbus,  167  Ind.  139,  78  N.  E.  657,  12  L. 
R.  A.  (N.  S.)  416;  Aschoff  v.  Evansville,  34  Ind.  App.  25,  72  N.  E. 
279;  Coy  v.  Indianapolis  Gas  Co.,  146  Ind.  655,  46  N.  E.  17,  36  L. 
R.  A.  535;  Fitch  v.  Seymour  Water  Co.,  139  Ind.  214,  37  N.  E.  9S2,  47 
Am.  St.  258;  Ft.  Wayne  v.  Christie,  156  Ind.  172,  59  N.  E.  385;  Ft. 
Wayne  v.  Patterson,  25  Ind.  App.  547,  58  N.  E.  747;  Logansport  v. 
Dick,  70  Ind.  65,  36  Am.  Rep.  166. 

IOWA.— Bennett  v.  Mt.  Vernon,  124  Iowa  537,  100  N.  W.  349. 

KANSAS.— Topeka  Water  Co.  v.  Whiting,  58  Kans.  639,  50  Pac. 
877,  39  L.  R.  A.  90. 

KENTUCKY.— Henderson  v.  Young,  119  Ky.  224,  26  Ky.  L. 
1152,  S3  S.  W.  583;  Owensboro  v.  Knox's  Admr.,  116  Ky.  451,  25  Ky. 
L.  680,  76  S.  W.  191;  Terrell  v.  Louisville  Water  Co.,  127  Ky.  77, 
105  S.  W.  100. 

MAINE.— Butler  v.  Bangor,  67  Maine  3S5. 

MASSACHUSETTS.— Aldworth  v.  Lynn,  153  ]Mass.  53,  26  N.  E. 
229,  10  L.  R.  A.  210;  Connolly  v.  Waltham,  156  Mass.  368,  31  N.  E. 
302;  Dickinson  v.  Boston,  ISS  Mass.  595,  75  N.  E.  68,  1  L.  R.  A. 
(N.  S.)  664;  Fox  v.  Chelsea,  171  Mass.  297,  50  N.  E.  622;  Griffin  v. 
Lawrence,  135  Mass.  365;  Haley  v.  Boston,  191  Mass.  291,  77  N.  E. 
888,  5  L.  R.  A.  (N.  S.)  1005;  Hand  v.  Brookline,  126  Mass.  324;  Hill 
V.  Boston,  122  Mass.  344,  23  Am.  Rep.  332;  Lynch  v.  Springfield,  174 
Mass.  430,  54  N.  E.  871;  Powers  v.  Fall  River,  168  Mass.  60,  46  N.  E. 
408;  St.  Germain  v.  Fall  River,  177  Mass.  550,  59  N.  E.  447;  Sheehan 
V.  Boston,  171  Mass.  296,  50  N.  E.  543;   Stock  v.  Boston,  149  Mass, 


§  265  PUBLIC    UTILITIES.  ^20 

As  Stated  by  the  court  in  the  case  of  Yazoo  City 
V.  Birchett,  89  Miss.  700,  42  So.  569,  decided  in  1906, 
"When    a    city   embarks    in    the    management    of    any 

410,  21  N.  E.  871,  14  Am.  St.  430;  Stoddard  v.  Winchester,  157  Mass. 
567,  32  N.  B.  948;  Watson  v.  Neeham,  161  Mass.  404,  37  N.  E.  204, 
24  L.  R.  A.  287. 

MICHIGAN.— Brink  v.  Grand  Rapids,  144  Mich.  472,  108  N.  W. 
430;  Miller  v.  Kalamazoo,  140  Mich.  494,  103  N.  W.  845. 

MINNESOTA.— Eisenmenger  v.  St.  Paul  Water  Comrs.,  44  Minn. 
457,  47  N.  W.  156;  Megins  v.  Duluth,  97  Minn.  23,  106  N.  W.  89; 
Wiltse  V.  Red  Wing,  99  Minn.  255,  109  N.  W.  114. 

MISSISSIPPI.— Jackson  v.  Anderson,  97  Miss.  1,  51  So.  896; 
Yazoo  City  v.  Birchett,  89  Miss.  700,  42  So.  569. 

MISSOURI.— Boothe  v.  Fulton,  85  Mo.  App.  19;  Bullmaster  v. 
St.  Joseph,  70  Mo.  App.  60;  Burnes  v.  St.  Joseph,  91  Mo.  App.  489; 
Carey  v.  Kansas  City,  187  Mo.  715,  86  S.  W.  438,  70  L.  R.  A,  65; 
Dammann  v.  St.  Louis,  152  Mo.  186,  53  S.  W.  932;  Henderson  v. 
Kansas  City,  177  Mo.  477,  76  S.  W.  1045;  Rice  v.  St.  Louis,  165  Mo. 
636,  65  S.  W.  1002. 

NEBRASKA.— Reed  v.  Syracuse,  83  Nebr.  713,  120  N.  W.  180. 

NEW  HAMPSHIRE.— Edgerly  v.  Concord,  62  N.  H.  8;  Grimes 
V.  Keene,  52  N.  H.  330:  Gross  v.  Portsmouth,  68  N.  H.  266,  33  Atl. 
256,  73  Am.  St.  586;  Lockwood  v.  Dover,  73  N.  H.  209,  61  Atl.  32; 
Rhobidas  v.  Concord,  70  N.  H.  90,  47  Atl.  82,  51  L.  R.  A.  381,  85 
Am.  St.  604. 

NEW  YORK.— Board  of  Rapid  Transit  R.  Comrs.,  In  re,  197  N. 
Y.  81,  90  N.  E.  456,  36  L.  R.  A.  (N.  S.)  647,  18  Ann.  Cas.  366;  Brusso 
V.  Buffalo,  90  N.  Y.  679;  Dunstan  v.  New  York,  91  App.  Div.  355,  86 
N.  Y.  S.  562;  Ettlinger  v.  New  York,  58  Misc.  Rep.  229,  109  N.  Y.  S. 
44;  Kelsey  v.  New  York,  123  App.  Div.  381,  107  N.  Y.  S.'1089;  Max- 
milian  v.  New  York,  62  N.  Y.  160,  20  Am.  Rep.  468;  McAvoy  v.  New 
York,  54  How,  Pr.  245;  Messersmith  v.  Buffalo,  138  App.  Div.  427, 
122  N.  Y.  S.  918;  Missano  v.  New  York,  160  N.  Y.  123,  54  N.  E.  744; 
Morton  v.  New  York,  140  N.  Y.  207,  35  N.  E.  490,  22  L.  R.  A.  241; 
New  York  v.  Bailey,  2  Denio  433;  Oakes  Mfg.  Co.  v.  New  York,  206 
N.  Y.  221,  749;  99  N.  E.  540,  100  N.  E.  414,  42  L.  R.  A.  (N.  S.)  286; 
Pettengill  v.  Yonkers,  116  N.  Y.  558,  22  N.  E.  1095,  15  Am.  St.  442; 
Quill  V.  New  York,  36  App.  Div.  476,  55  N.  Y.  S.  889;  Seward  v. 
Rochester,  109  N.  Y.  166,  16  N.  E.  348;  Southeast  v.  New  York,  96 
App.  Div.  598,  89  N.  Y.  S.  630;  Terry  v.  New  York,  8  Bosw.  504; 
Wannamaker  v.  Rochester,  44  N.  Y.  St.  45,  17  N.  Y.  S.  321. 

NORTH  CAROLINA.— Fisher  v.  New  Bern,  140  N.  Car.  506,  53 
S.  E.  342,  5  L.  R.  A.  (N.  S.)  542;  Mitchell  v.  Raleigh  Electric  Co., 
129  N.  Car.  166,  39  S.  E.  801,  55  L.  R.  A.  398,  85  Am.  St.  735. 

OHIO.— Ironton  v.  Kelley,  38  Ohio  St.  50. 


321  NEGLIGENCE.  §  266 

Utility  for  profit,  it  is  liable,  or  not  liable,  by  precisely 
the  same  rules  applicable  to  private  corporations  or 
individuals    conducting   such    enterprises." 

§  266.  Municipality  not  liable  in  providing  fire  pro- 
tection.— The  distinction  which  it  is  necessary  to  make 
in  determining  the  liability  of  the  municipality  in  this 
connection  between  the  two  capacities  of  municipal 
corporations  is  well  pointed  out  in  the  case  of  Terrell 
V.  Louisville  Water  Co.,  127  Ky.  yy,  105  S.  W.  100, 
decided  in  1907,  where  the  court,  in  holding  that  the 
furnishing  of   fire   protection   only   and   the   operation 

OKLAHOMA.— Norman  v.  Ince,  8  Okla.  412,  58  Pac.  632. 

OREGON.— Esberg  Cigar  Co.  v.  Portland,  34  Ore.  282,  55  Pac. 
961,  43  L.  R.  A.  435. 

PENNSYLVANIA.— Baker  v.  North  East,  151  Pa.  234,  24  Atl. 
1079;  Glase  v.  Philadelphia,  169  Pa.  489,  32  Atl.  600;  Rumsey  v. 
Philadelphia,  171  Pa.  63,  32  Atl.  1133;  Smith  v.  Philadelphia,  81  Pa. 
38,  22  Am.  Rep.  731;  Western  Savings  Fund  Society  v.  Philadelphia, 
31  Pa.  183,  72  Am.  Dec.  730. 

RHODE  ISLAND.— Aldrich  v.  Tripp,  11  R.  I.  141,  23  Am.  Rep. 
434. 

SOUTH  CAROLINA.— Irvine  v.  Greenwood,  89  S.  Car.  511,  72  S. 
E.  22S.  36  L.  R.  A.   (N.  S.)  363. 

SOUTH  DAKOTA.— Wilson  v.  Mitchell,  17  S.  Dak.  515,  <»7  N.  W. 
741,  65  L.  R.  A.  168,  106  Am.  St.  784. 

TEXAS.— Lenzen  v.  New  Braunfels,  13  Tex.  Civ.  App.  335,  35 
S.  W.  341;  Paris  v.  Tucker  (Tex.  Civ.  App.)  93  S.  W.  233;  Ysleta  v. 
Babbitt,  8  Tex.  Civ.  App.  432,  28  S.  W.  702. 

UNITED  STATES.— Guardian  Trust  &  Deposit  Co.  v.  Fisher,  200 
U.  S.  57,  50  L.  ed.  367. 

UTAH.— Brown  v.  Salt  Lake  City,  33  Utah  222,  93  Pac.  570,  14  L. 
R.  A.  (N.  S.)  619;  Levy  v.  Salt  Lake  City,  3  Utah  63,  1  Pac.  160. 

VERMONT.— Bragg  v.  Ruthland,  70  Vt.  606,  41  Atl.  578;  Stock- 
well  V.  Ruthland,  75  Vt.  76,  53  Atl.  132;  Welsh  v.  Ruthland,  56  Vt. 
228,  48  Am.  Rep.  762;  Wilkins  v.  Rutland,  61  Vt.  336,  17  Atl.  735. 

WASHINGTON.— Collensworth  v.  New  Whatcom,  16  Wash.  224, 
17  Pac.  439;  Fidelity  &  C.  Co.  v.  Seattle,  16  Wash.  445,  47  Pac.  963. 

WISCONSIN.— Kuehn  v.  Milwaukee,  92  Wis.  263,  65  N.  W.  1030; 
Piper  V.  Madison,  140  Wis.  311,  122  N.  W.  730,  25  L.  R.  A.  (N.  S.) 
239,  133  Am.  St.  107S;  State  Journal  Printing  Co.  v.  Madison,  148 
Wis.  396,  134  N.  W.  909. 

21— Pub.  Ut. 


§  267  PUBLIC    UTILITIES.  322 

of  its  fire  department  is  the  discharge  of  a  public  gov- 
ernmental duty  for  which  the  municipality  is  not  liable 
in  damages  in  case  of  negligence,  says :  "In  furnish- 
ing to  its  citizens  fire  protection,  the  city  is  discharg- 
ing a  governmental  function.  It  is  weW  settled  that 
the  city  is  not  responsible  in  damages  for  the  negli- 
gence of  its  firemen.  The  same  principle  must  apply 
to  the  other  agencies  employed  by  the  city  as  part  of 
its  fire  department.  The  city  is  not  responsible  to  a 
property  owner  if  one  of  its  fire  engines  is  by  negli- 
gence allowed  to  get  out  of  repair,  and  by  this  means 
his  property  is  lost.  The  thing  that  was  out  of  re- 
pair here  was  a  valve  at  one  place,  and  at  another  the 
top  of  the  cistern  was  so  covered  up  with  snow  and 
ice  that  it  took  the  firemen  some  ten  minutes  to  locate 
and  open  it.  In  building  these  cisterns  the  city  acted 
in  a  governmental  capacity,  and  it  is  no  more  liable 
to  the  property  owner  for  their  being  out  of  order 
than  it  would  be  if  the  fire  chief  had  been  negligent 
in  responding  promptly  to  the  alarm,  or  in  his  efforts 
to  put  out  the  fire  after  he  arrived  on  the  scene." 

§  267.  Municipality  liable  in  furnishing  water  pri- 
vately.— Where,  however,  the  municipality  undertakes 
to  provide  water  service  or  any  other  municipal  public 
utility  to  the  individual  inhabitants  for  their  private 
domestic  use,  although  this  service  is  furnished  in  con- 
nection with  the  providing  of  a  public  service  and  the 
performance  of  a  governmental  duty,  the  municipality 
becomes  liable  for  negligence  in  providing  service  for 
the  private  domestic  purposes  for  the  reason  that  in 
doing  so  it  acts  in  the  same  capacity  as  the  private 
corporation  or  individual  undertaking  to  render  such 
service  for  the  purpose  of  realizing  a  revenue  or  some 
special  benefit  or  advantage  for  itself  and  its  inhab- 
itants.   As  the  court  in  the  case  of  Brown  v.  Salt  Lake 


323  NEGLIGENCE.  §  268 

City,  33  Utah  222,  93  Pac.  570,  14  L.  R.  A.  (N.  S.) 
619,  decided  in  1908,  says:  "It  may  be  conceded,  for 
the  purposes  of  this  discussion,  that,  in  so  far  as  the 
<:ity  provides  apparatus  and  water  for  fire  protection, 
it  acts  in  a  governmental  capacity.  The  city,  how- 
ever, was  not  required  to  assume  the  duty  of  furnish- 
ing its  inhabitants  water  for  all  uses  and  purposes. 
When  it  acquired  property,  and  constructed  the  sys- 
tem of  waterworks  for  that  purpose,  however,  it  did 
so  voluntarily,  and  with  a  view  of  deriving  revenue 
therefrom.  It  therefore  acquired,  owned,  and  con- 
ducted its  water  system  and  the  property  connected 
therewith,  except  as  stated  above,  as  any  other  private 
corporation  or  owner  would,  and  is  liable  in  like  man- 
ner and  to  the  same  extent  as  such  owners  would  be." 

§  268.  The  two  capacities  of  municipal  corpora- 
tions.— The  case  of  Aiken  v.  Columbus,  167  Ind.  139, 
78  N.  E.  657,  12  L.  R.  A.  (N.  S.)  416,  decided  in  1906, 
makes  this  distinction  between  the  two  capacities  of 
municipal  corporations  and  indicates  the  liability  of 
municipalities  in  furnishing  electric  light  for  private 
domestic  purposes  as  follows:  "Speaking  in  general 
terms,  it  may  be  said  that  the  duties  which  municipal- 
ities perform  with  respect  to  the  public  health,  chari- 
ties, and  schools,  in  the  protection  of  property  against 
fire,  and  in  the  maintenance  of  the  peace,  are  ordinarily 
regarded  as  performed  as  representatives  of  the  gen- 
eral public;  and  in  such  cases  cities  and  towns  enjoy 
the  same  immunity  from  actions  ex  delicto  as  does 
the  state.     .     .  Coming  to  the  purpose  for  which 

the  power  to  erect  an  electric  light  plant  was  granted, 
it  must  be  admitted  that  public  lighting  serves  a  gov- 
ernmental purpose,  at  least  in  an  incidental  way,  in 
that  it  is  a  check  upon  crime  and  immorality;  but  the 
element    of  local   convenience   to   the   inhabitants,   and 


§  269  PUBLIC    UTILITIES.  324 

the  extent  to  which  such  hghts  protect  the  municipal 
treasury  against  damage  suits,  because  of  streets  which 
have  become  temporarily  or  permanently  unsafe,  af- 
ford a  very  clear  basis  for  the  assertion  that  such 
lights  are  a  municipal  utility.  ,  .  .  We  are  satisfied 
that  we  are  within  the  authorities  in  holding,  as  we  do, 
that  a  city  or  town  is  answerable  ex  delicto  for  any- 
direct  invasion  of  the  rights  of  third  persons  in  the 
management   of  its   public-lighting   system." 

In  one  of  the  leading  cases  distinguishing  between 
the  two  capacities  of  municipal  corporations  and  de- 
fining the  liability  of  the  municipality  as  determined 
by  this  distinction,  the  court  permitted  recovery  for 
the  negligent  killing  of  a  party  by  the  municipality  in 
connection  with  the  operation  of  its  electric  light  plant, 
which  was  used  to  light  the  city  and  to  provide  light 
to  its  inhabitants  for  domestic  purposes.  As  the  court 
in  this  case  of  Davoust  v.  Alemeda,  149  Cal.  69,  84 
Pac.  760,  5  L.  R.  A.  (N.  S.)  536,  decided  in  1906,  said: 
"Such  a  corporation  (i.  e.,  municipal),  however,  has 
a  double  character — governmental,  and  also  proprie- 
tary and  private — and,  when  acting  in  the  latter  capac- 
ity, its  liabilities  arising  out  of  either  contract  or  tort 
are  the  same  as  those  of  natural  persons  or  private 
corporations.  .  .  .  And  that  the  respondent,  in 
maintaining  and  operating  its  electric  plant,  was  ex- 
ercising, not  its  governmental  functions,  but  its  pro- 
prietary and  private  rights,  is  entirely  clear. 
The  authorities  uniformly  hold  that  the  duties  arising 
from  the  operation  of  gas  works,  electric  works,  water- 
works, and  such  like  public  utilities,  are  of  the  private 
nature  which  is  required  to  make  municipal  corpora- 
tions liable  for  damages  caused  by  negligence  therein." 

§  269.     Liability  under  municipal  ownership. — ^That 
the    municipality   is   liable    for   negligence   because    in 


325  NEGLIGENCE.  §  2/0 

the  management  of  its  property  which  is  used  for  its 
own  benefit  or  profit  it  is  exercising  its  proprietary 
and  business  functions  for  the  purpose  of  realizing  a 
profit  from  the  service  rendered  was  decided  in  1906, 
also  in  the  case  of  Eaton  v.  Weiser,  12  Idaho  544,  86 
Pac.  541,  118  Am.  St.  225,  where  the  court  said:  "The 
city  was  engaged  in  a  private  enterprise,  namely,  that 
of  manufacturing  and  selling  electric  light  to  its  in- 
habitants. Such  an  engagement  or  enterprise  is  not 
one  of  the  public  governmental  duties  of  municipali- 
ties. Municipal  ownership  in  the  usual  and  common 
acceptation  of  that  term  must  of  necessity  carry  with 
it  the  same  duty,  responsibility,  and  liabilities  that  are 
imposed  upon  and  attach  to  private  owners  of  similar 
enterprises.  If  the  city  owns  and  operates  an  electric 
light  system,  and  sells  light  to  its  inhabitants,  there 
is  no  reason  why  it  should  not  be  held  to  the  same 
responsibility  for  injuries  received  on  account  of  its 
negligent  conduct  of  the  business  as  would  a  private 
individual  be  who  might  be  running  an  opposition 
plant  in  the  same  municipality  and  selling  light  to  the 
citizens  thereof.  There  is  abundant  authority  to  be 
found  in  the  books  in  support  of  this  position." 

§  270.  Liability  under  commission. — Nor  is  the 
municipality  any  less  liable  in  case  the  service  is  fur- 
nished through  a  commission  created  by  the  state  as 
the  means  of  providing  the  service  by  the  municipality 
because  the  commission  as  an  instrumentality  of  the 
state  is  acting  in  its  ministerial  or  corporate  character 
in  the  management  of  property  used  for  its  own  bene- 
fit and  discharging  powers  and  duties  voluntarily  as- 
sumed for  its  own  advantage.  And  while  the  munici- 
pality in  providing  itself  with  electric  light  for  the 
purpose  of  illuminating  its  streets  and  other  public 
places  is  generally  regarded  as  performing  a  govern- 


§  271  PUBLIC    UTILITIES.  326 

mental  duty  in  the  exercise  of  its  police  power,  if  in 
addition  thereto  it  also  provides  service  for  private 
and  domestic  uses,  the  municipality  to  that  extent 
stands  on  the  same  footing  as  w^ould  any  private  in- 
dividual or  corporation  in  the  exercise  of  similar  fran- 
chise rights  and  in  the  performance  of  like  duties,  for 
as  the  court  in  the  case  of  Owensboro  v.  Knox's 
Admr.,  ii6  Ky.  451,  25  Ky.  L.  680,  76  S.  W.  191,  decided 
in  1903,  says:  "The  city,  as  a  body  corporate,  has 
become  the  ovv^ner  and  operator  of  a  plant  for  the  gen- 
eration and  distribution  of  a  most  subtle  and  danger- 
ous agency.  The  degree  of  care,  prudence,  and  over- 
sight required  of  it  in  the  operation  of  the  plant  ought 
to  be  the  same  as  if  it  were  operated  by  an  individual. 
The  law,  in  allowing  damages  for  a  neglect  of  such 
duties,  is  not  primarily  to  punish  the  negligent  opera- 
tor, but  to  protect  and  to  compensate  the  injured  per- 
son. If  the  corporation,  whether  municipal  or  pri- 
vate, embarks  in  a  business  so  menacing  to  life  and 
safety,  it  ought  to  use  that  degree  of  care  that  is 
commensurate  with  the  danger  it  creates." 

§  271.  Municipality  liable  for  damage  from  broken 
water  main. — In  the  case  of  State  Journal  Printing  Co. 
V.  Madison,  148  Wis.  396,  134  N.  W.  909,  decided  in 
1912,  where  the  action  was  for  damages  resulting 
from  water  escaping  from  a  broken  main  in  the  water 
system  of  the  defendant  city,  which  inundated  the 
cellar  of  the  plaintiff,  the  court  permitted  a  recovery 
for  the  damages  for  the  reason  that:  "In  furnishing 
water  to  private  consumers,  the  city  is  acting  in  a 
private  business  capacity,  and  not  in  its  governmental 
capacity,  and  it  is  bound  to  exercise  ordinary  care, 
namely,  that  reasonable  degree  of  care  in  view  of  the 
dangers  involved  which  the  great  mass  of  ordinarily 
prudent  persons  engaged  in  the  same  or  similar  busi- 


327  NEGLIGENCE.  §  272 

ness  would  and  do  exercise  under  like  circumstances. 
For  any  failure  to  exercise  this  degree  of  care  prox- 
imately causing  injury  to  another,  the  city  is  liable  to 
the  same  extent  that  a  private  person  or  a  corpora- 
tion operating  a  water-works  system  is  liable;  no  more 
and  no  less." 

§  272.  Municipality  liable  for  water-works  same  as 
for  streets. — The  case  of  Lenzen  v.  New  Braunfels, 
13  Tex.  Civ.  App.  335,  35  S.  W.  341,  decided  in  1896, 
holds  the  municipality  liable  for  negligence  in  the  op- 
eration of  a  water-works  system  for  the  same  reason 
that  liability  is  established  against  it  in  the  mainte- 
nance of  its  streets  and  sewers  and  other  like  under- 
takings because  this  is  concerned  with  a  business  un- 
dertaking on  the  part  of  the  municipality,  and  as  the 
court  says:  "It  is  admitted,  with  only  a  few  excep- 
tions, that  a  municipal  corporation  that  engages  in  a 
business  for  its  gain  and  advantage,  although  the  pub- 
lic are  served  in  its  performance,  will  be  held  liable, 
as  an  individual,  for  its  actionable  negligence  in  the 
conduct  of  its  business.  This  is  even  admitted  in 
those  courts  that  adopt  the  extreme  rule  of  the  limited 
liability  of  municipal  corporations.  There  can  be  no 
question,  under  the  averments,  but  that  these  works 
are  a  business  concern  carried  on  by  the  city.  It  is 
as  much  so  as  any  work  or  enterprise  that  a  city  may 
engage  in." 

§  273.  No  liability  under  statute  where  duty 
partly  governmental. — The  case  of  Irvine  v.  Green- 
wood, 89  S.  C.  511,  72  S.  E.  228,  36  L.  R.  A.  (N.  S.) 
363.  decided  in  191 1,  seems  to  be  contrary  to  the  gen- 
eral rule  in  that  the  court  refuses  to  make  the  distinc- 
tion between  the  public  governmental  function  and 
the  private  business  capacity  of  the  municipality  in  pro- 


§  274  PUBLIC    UTILITIES.  328 

viding  municipal  public  utility  service.  This  decision, 
however,  is  based  upon  the  peculiar  statutory  provi- 
sion, for  as  the  court  says:  "Having  in  view  the  doc- 
trine long  ago  laid  down  by  the  courts  of  this  state, 
that  municipal  corporations  are  liable  for  torts  only 
when  made  so  by  legislative  enactment,  the  general 
assembly  has  by  law  expressed  its  will  as  to  the 
extent  of  the  liability  of  such  corporations  for  torts. 
The  courts  are  therefore  bound  to  restrict  the  liabiHty 
to  the  terms  of  the  statute;  and  the  statute  authorizes 
no  distinction  between  governmental  and  public  du- 
ties, and  supposed  private  municipal  enterprises.  .  .  . 
The  lighting  of  the  streets  of  a  city  is  universally  rec- 
ognized as  a  public  and  governmental  function.  It 
can  not  alter  the  case  that  the  same  plant  which  sup- 
plied electricity  for  the  street  light  also  supplied  the 
electricity  for  the  lights  in  private  dwelHngs  and  busi- 
ness  houses." 

§  274.  No  liability  for  public  duty  which  is  not 
commercial  enterprise. — By  way  of  further  illustrating 
the  distinction  between  the  two  capacities  of  municipal 
corporations  in  another  connection  the  case  of  Haley 
v.  Boston,  191  Mass.  291,  yy  N.  E.  888,  5  L.  R.  A. 
(N.  S.)  1005,  decided  in  1906,  furnishes  a  different 
application  of  this  principle  of  municipal  liability  in 
connection  with  an  injury  sustained  by  the  negligence 
of  the  municipality  in  collecting  ashes  from  its  citi- 
zens for  profit.  In  refusing  recovery  for  such  an  in- 
jury because  the  work  which  was  being  performed  by 
the  municipahty  was  of  a  public  nature  the  court  said: 
"The  general  rule  is  well  settled  in  this  common- 
wealth that  a  city  or  town  which  Voluntarily  under- 
takes work  of  a  commercial  character,  from  which  it 
seeks  to  derive  revenue  or  other  special  advantage, 
is   liable   like   a   private   employer   for   the   negligence 


329  NEGLIGENCE.  §  275 

of  its  servants  or  agents  who  are  engaged  therein. 
.  .  .  But  these  exceptions  never  had  been  held  in 
this  commonw^ealth  to  affect  the  general  rule  that  a 
city  or  town  is  not  to  be  held  to  any  liability  for  the 
negligence  of  persons  employed  by  it  in  work  merely 
of  a  public  character  required  or  authorized  to  be 
done  and  undertaken  without  compensation  in  the 
performance  of  a  public  duty.  ...  It  becomes 
material,  then,  to  determine  what  is  the  character  of 
this  work  of  removing  ashes  from  dwelling  houses; 
and  it  seems  to  us  to  be  work  of  a  public  nature. 
It  is  provided  by  statute  that  a  town  may  contract 
for  the  disposal  of  its  garbage,  refuse,  and  offal. 
.  .  .  In  this  case  it  appears  that  at  the  time  of  the 
accident  the  cart  in  question  was  removing  only 
dwelling  house  ashes." 

§  275.  Liability  for  negligent  maintenance  of 
water-works  property. — As  furnishing  a  still  different 
distinction  of  the  capacities  of  municipal  corporations 
and  the  liability  depending  thereon,  the  case  of  Win- 
ona V.  Botzet,  169  Fed.  321,  23  L.  R.  A.  (N.  S.)  204, 
decided  in  1909,  is  of  value.  The  decision  which  states 
the  necessary  facts  is  in  the  following  language:  "The 
duty  was  imposed  upon  the  city  to  exercise  care  to 
render  this  highway  reasonably  safe  for  travelers,  and 
it  blew  a  whistle  within  no  feet  of  it,  which  made  it 
unsafe  for  travelers,  and  which  constituted  a  public 
nuisance  within  the  express  terms  and  plain  meaning 
of  this  statute.  ...  A  city  has  two  classes  of 
powers — the  one,  legislative,  public,  in  the  exercise 
of  which  it  acts  as  a  political  subdivision  and  delegate 
of  the  state  and  governs  its  people;  the  other,  private, 
corporate  business,  in  the  exercise  of  which  it  acts 
for  the  advantage  of  the  inhabitants  of  the  city  and  of 
itself  as  a  legal  personality.     .     .     .     But  for  damages 


§  276  PUBLIC    UTILITIES.  33O 

caused  by  the  wrongful  acts  and  omissions  of  its  offi- 
cers and  agents  within  the  scope  of  their  authority 
in  the  exercise  of  its  powers  of  the  latter  class,  such 
as  its  power  to  build  and  maintain  bridges,  streets, 
and  highways,  the  power  to  construct  and  keep  in 
repair  sewers  .  .  .  and  the  power  to  build,  main- 
tain, and  operate  water-works  to  furnish  water  to  the 
city  and  to  its  inhabitants  for  compensation  (Wiltse 
V.  Red  Wing,  99  Minn.  255,  260,  109  N.  W.  114; 
Lynch  v.  Springfield,  174  Mass.  430,  54  N.  E.  871), 
the  city  is  liable  to  the  same  extent  as  a  private  in- 
dividual or  corporation  under  like  circumstances.  The 
power  of  a  city  to  construct  and  operate  water-works 
is  not  a  political  or  governmental,  but  a  private  or  cor- 
porate, power,  granted  and  exercised,  not  to  enable  it 
to  control  its  people,  but  to  authorize  it  to  furnish 
to  itself  and  its  inhabitants  water  for  their  private 
advantage." 

§  276.     Liable   only   for   ordinary   use   of   water. — 

This  distinction  between  the  two  capacities  of  municipal 
corporations  which  determines  their  liability  for  negli- 
gence and  indicates  a  further  practical  limitation  of 
such  a  liability  is  well  defined  in  the  recent  case  of 
Oakes  Mfg.  Co.  v.  New  York,  206  N.  Y.  221,  99  N. 
E.  540,  100  N,  E.  414,  decided  October  i,  1912,  where 
the  court  denied  recovery  for  negligence  against  the  de- 
fendant for  furnishing  water  to  the  plaintiff  that  was  im- 
pure, because  the  plaintiff  knew  of  its  impurity  which 
only  affected  its  use  for  manufacturing  purposes,  which 
was  a  peculiar  one,  and  because  the  supply  was  health- 
ful and  satisfactory  for  ordinary  domestic  uses.  In 
the  course  of  its  opinion  the  court  said:  "But  in  the 
present  case,  when  in  accordance  with  the  powers 
conferred  on  it  the  city  undertook  to  maintain  a 
municipal  water  system  and  to  supply  to  private  con- 


331  NEGLIGENCE.  §276 

sumers  at  a  fixed  compensation,  it  was  not  acting 
in  such  [governmental]  capacity  as  above  stated. 
It  entered  on  an  enterprise  which  involved  the  ordinary- 
incidents  of  a  business  wherein  was  sold  that  which 
people  desired  to  buy  which  might  become  a  source 
of  profit,  and  under  these  circumstances  it  became 
liable  for  breach  of  contract  or  for  negligence  as  the 
proprietor  of  a  private  business  might  become.  Max- 
milian  v.  Mayor,  &c.  of  N.  Y.,  62  N.  Y.  160,  20  Am. 
Rep.  468;  Matter  of  Rapid  Transit  Commissioners, 
197  N.  Y.  81,  90  N.  E.  456,  36  L.  R.  A.  (N.  S.)  647, 
18  Ann.  Cas.  366;  Messersmith  v.  Buffalo,  138  App. 
Div.  427,  122  N.  Y.  S.  918;  Piper  v.  Madison,  140 
Wis.  311,  122  N.  W.  730,  25  L.  R.  A.  (N.  S.)  239,  133 
Am.  St.  1078;  Lynch  v.  Springfield,  174  Mass.  430, 
54  N.  E.  871.  .  .  .  There  was  no  contract  between 
the  defendant  and  the  plaintiff,  whereby  the  former 
undertook  to  supply  proper  water  and  of  which  it 
made  a  breach  for  which  recovery  can  now  be  had. 
Moreover,  this  is  an  action  of  negligence  and  not  for 
breach  of  contract.  Plaintiflf  is  not  entitled  to  recover 
on  account  of  the  impure  water  which  has  been  sup- 
plied to  it  within  the  principles  of  those  cases  which 
recognize  the  rule  of  liability  where  a  municipality 
negligently  supplies  impure  water  to  a  consumer  who 
in  ignorance  of  its  quality  uses  the  same  and  sufifers. 
In  this  case  it  appears  without  dispute  that  the  plain- 
tiflf understood  the  character  of  the  water  which  was 
being  supplied  to  it,  and  it  could  not  voluntarily  use 
it  with  knowledge  of  its  impurities  and  then  recover 
damages  because  of  them." 


CHAPTER  XVI. 

MUNICIPAL    PUBLIC    UTILITY    SYSTEMS    AS 
ADDITIONAL  SERVITUDES. 


Section. 

277.  Equipment  of  municipal  public  utilities  in  highways. 

278.  Public  purposes  for  which  highways  dedicated. 

279.  Purposes  include   communication   and   transportation. 

280.  Purposes  not  limited  to  those  contemplated  at  dedication. 

281.  Equipment  for  local  service  no  additional  servitude. 

282.  Street  railways  and  pipe  lines  local  not  additional  servitude? 

283.  Interurban  railway  system. 

284.  Tendency  to  extend  municipal  utility  service. 

285.  Streets  and  other  highways  not  distinguished. 

286.  Expedient  to  encourage  extensions. 

287.  Decisions  conflicting. 

288.  Communication  by  wire  in  lieu  of  travel. 

289.  Public  use  not  additional  servitude. 

290.  Public   rights   paramount    after    dedication. 

291.  Public  entitled  to  underground  use  of  streets. 

292.  Travel  in  streets  relieved  by  telephone. 

293.  Lighting  system  no  additional  servitude. 

294.  Modern  improvements  included  in  "public  purpose." 

295.  Necessary  underground  conduits  included. 

296.  Streets  and  other  highways  formerly  distinguished. 

297.  Distinction  no  longer  obtains. 

298.  Steam,  street  and  interurban  railways  distinguished. 

299.  Interurban  railway  no  additional  servitude. 

300.  Telephone  lines  additional  servitudes  in  Illinois. 

301.  Light  being  necessity  is  not  additional  servitude. 

302.  Telephone  system  held  additional  servitude  in  New  York. 

303.  Street  railway  system  held  additional  servitude  in  New  York. 

304.  Underground   rapid   transit   system   additional. 

305.  Telegraph  and  telephone  compared. 

306.  Telephone  new  method  of  subjecting  streets  to  old  use. 

307.  Use  for  public  and  private  service  distinguished. 

308.  Nature  of  use  generally  not  distinguished. 

309.  Street  and  rural  highway  not  distinguished  for  telephone. 

310.  Tendency  of  decisions  progressive  and  practicable. 

332 


333  ADDITIONAL   SERVITUDES.  §  277 

Section. 

311.  Modern  inventions  for  or  in  lieu  of  travel  included  in  public 

purposes. 

312.  Conservative  decisions  find  additional  servitudes. 

313.  Original  dedication  made  the  test. 

314.  Ownership  of  fee  in  street  not  considered. 

315.  Interurban  in  rural  highway  held  additional  servitude. 

§  277.  Equipment  of  municipal  public  utilities  in 
highways. — The  courts  are  not  agreed  as  to  whether 
an  additional  servitude  or  burden  is  imposed  upon  the 
abutting  property  owners  by  placing  the  equipment 
of  municipal  public  utility  plants  in  the  streets  or  other 
highways.  In  different  jurisdictions  the  courts  have 
taken  diametrically  opposite  positions  in  determining 
whether  the  installation  of  poles,  wires,  pipe  lines  and 
tracks  along  the  streets  or  highways  amounts  to  such 
a  taking  or  damaging  of  the  property  of  the  abutting 
owner  as  to  entitle  him  to  compensation  under  the 
constitution  for  the  reason  that  a  servitude  is  created 
in  addition  to  those  contemplated  or  included  in  the 
original  grant  or  dedication  for  the  use  of  the  pubHc. 
The  courts  are  agreed  that  by  the  exercise  of  the 
right  of  eminent  domain  the  municipal  public  utility 
may  acquire  such  rights  in  the  streets  and  highways 
which  would  permit  the  installation  and  operation  of 
its  plant  for  the  purpose  of  furnishing  its  service 
because  the  use  is  a  public  one.  The  controversy, 
however,  arises  in  determining  whether,  within  the 
constitutional  provision  prohibiting  the  taking  or  dam- 
aging of  property  for  public  use  without  just  com- 
pensation to  the  owner,  the  municipal  public  utility 
may  install  its  system  and  use  the  streets  and  high- 
ways without  payment  to  the  owner  of  the  abutting 
property. 

§  278.  Public  purposes  for  which  highways  dedi- 
cated.— The    determination    of    this    question    by    the 


§  279  PUBLIC    UTILITIES.  334 

courts  in  diametrically  opposite  ways  results  from 
their  different  definitions  of  what  is  included  in  the 
"public  purposes"  for  which  the  streets  and  highways 
are  dedicated.  Those  courts  holding  that  the  pur- 
poses covered  by  the  dedication  are  only  the  right  of 
the  public  actually  to  pass  over  and  along  the  territory- 
included  within  the  limits  of  the  street  or  highway  in 
the  exercise  of  their  right  of  locomotion  and  transpor- 
tation in  a  physical  tangible  manner  decide  that  the 
installation  of  poles,  wires,  and  pipe  lines  for  the  trans- 
portation of  heat,  light  and  the  communication  of 
intelligence  by  wire  constitutes  an  additional  servitude 
or  burden  for  which,  under  the  constitutional  guaranty, 
the  abutting  property  owner  is  entitled  to  be  com- 
pensated. This  is  the  conservative  position  which  is 
taken  by  several  jurisdictions  of  well-recognized  au- 
thority and  is  based  on  a  strict  literal  definition  of 
the  purposes  and  uses  for  which  the  streets  and  high- 
ways are  dedicated. 

§  279.  Purposes  include  communication  and  trans- 
portation.— The  increasing  weight  of  authority,  how- 
ever, and  it  would  seem  the  more  progressive  reason- 
ing, of  the  remaining  jurisdictions  define  the  purposes 
for  which  the  streets  and  highways  are  dedicated  so  as 
to  comprehend  not  only  those  actually  in  the  minds 
of  the  parties  at  the  time  of  the  dedication  and  for 
actual  physical  travel  and  transportation,  but  also  in- 
sist that,  on  acquiring  the  use  of  the  streets  and 
highways  for  public  purposes  and  in  the  payment  made 
to  the  abutting  property  owner,  the  public  has  the 
right  to  use  the  territory  thus  acquired  in  any  manner 
and  for  any  purpose  necessary  for  its  travel  and  trans- 
portation as  well  as  for  the  additional  purposes  of 
communication  and  of  furnishing  the  public  with  the 


335  ADDITIONAL   SERVITUDES.  §  280 

conveniences  of  public  utilities  as  afforded  by  modern 
invention;  thereby  permitting  more  of  the  pubHc  to 
have  and  enjoy  the  benefits  and  advantages  of  munici- 
pal public  utilities  as  they  may  be  or  become  available. 

§  280.  Purposes  not  limited  to  those  contemplated 
at  dedication. — These  courts  refuse  to  be  limited  to 
the  purposes  originally  contemplated  at  the  dedication 
or  to  admit  that  locomotion  is  the  only  use  intended 
to  be  made  of  the  streets  and  highways,  but  insist  that 
such  uses  include  any  and  all  improved  methods  for 
the  transmission  of  intelligence  as  well  as  for  actual 
travel,  for  which  the  messages  sent  by  wire  serves  as 
a  substitute  with  the  net  result  of  very  materially 
relieving  the  actual  travel  and  transportation  in  the 
street  and  highway.  For  the  reason  therefore  that 
any  such  additional  uses  which  take  advantage  of  new 
methods  that  may  be  devised  or  invented  for  trans- 
portation or  communication  are  properly  included  in 
the  dedication  of  the  street  or  highway  to  the  public 
use,  for  all  of  which  the  abutting  property  owner 
receives  payment  at  the  time  of  the  dedication,  and 
for  the  further  reason  that  the  substitution  of  such 
improved  methods  of  communication  as  the  telegraph 
or  telephone  as  well  as  the  enjoyment  of  any  other 
modern  municipal  public  utility  service  actually  re- 
lieves the  street  and  highway  from  traffic  and  ma- 
terially increases  and  makes  more  available  the  ad- 
vantages of  living  in  our  present-day  municipalities, 
the  increasing  weight  of  authority  refuses  to  find  that 
an  additional  servitude  is  created  by  virtue  of  the  in- 
stallation of  the  necessary  equipment  for  the  operation 
of  the  municipal  public  utility  system. 

§  281.  Equipment  for  local  service  no  additional 
servitude, — In  determining  for  what   uses  the   streets 


§  282  PUBLIC    UTILITIES.  336 

and  highways  are  dedicated  to  the  pubHc  with  the 
view  of  deciding  whether  an  additional  servitude  is 
created  by  the  installation  of  any  particular  munici- 
pal pubHc  utility,  one  of  the  most  important  factors 
is  the  nature  and  extent  of  the  service  rendered  or 
the  locality  served.  Where  the  service  rendered  is  en- 
tirely, or  for  the  most  part,  local  so  that  the  adjoining 
property  owners  and  other  inhabitants  living  adjacent 
to  the  street  or  highway  constitute  the  class  or  the 
majority  of  the  customers  served,  the  courts  for  that 
reason  are  inclined  to  hold  that  no  additional  servitude 
or  burden  is  imposed  by  the  installation  of  the  equip- 
ment necessary  to  render  such  service. 

§  282.  Street  railways  and  pipe  lines  local  not  addi- 
tional servitudes. — Under  this  distinction,  as  will  ap- 
pear in  a  number  of  the  cases  hereafter  noted  for  the 
purpose  of  discussing  this  principle  of  additional  servi- 
tudes, the  courts  have  generally  refused  to  find  that 
the  operation  of  a  street  railway  system  rendering 
local  service  or  the  laying  of  pipe  lines  for  the  purpose 
of  providing  municipal  public  utiHty  service  to  the 
inhabitants  of  the  municipality  creates  any  additional 
servitude  or  burden;  and  that  the  adjoining  property 
owner  can  only  recover  for  any  special  damages  actu- 
ally sustained  by  him  as  distinguished  from  other 
neighboring  property  owners.  For  the  reason  that 
the  purpose  is  a  public  and  a  necessary  one,  the  courts 
refuse  to  hold  that  the  installation  of  the  necessary 
equipment  to  furnish  a  lighting  system  for  the  purpose 
of  lighting  the  streets  and  highways  is  an  additional 
servitude,  although  several  hold  that,  where  the 
service  is  provided  for  private  purposes,  an  additional 
servitude  is  created  for  which  the  abutting  property 
owner  is  entitled  to  be  compensated. 


337  ADDITIONAL   SERVITUDES.  §  283 

§  283.  Interurban  railway  system. — The  interur- 
ban  system  of  transportation  necessitates  making  the 
distinction  between  local  service  and  foreign  or  non- 
resident service  with  the  effect  in  the  more  conserva- 
tive jurisdictions  that  the  installation  of  such  a  system 
is  held  to  constitute  an  additional  servitude  for  the 
reason  that  the  service  rendered  is  not  primarily,  nor 
for  the  most  part,  local.  An  increasing  number  of 
courts  of  the  more  progressive  jurisdictions,  however, 
insist  that  no  additional  servitude  is  created  in  the  use 
of  the  street  or  highway  by  the  interurban  system 
for  the  reason  that  the  dedication  was  not  merely  for 
local  use,  but  that  the  system  of  highways,  including 
the  streets,  is  under  the  control  of  the  state  and  is 
dedicated  for  the  general  use  of  all  the  people  of  the 
state;  that  the  establishing  of  better  facilities  of  com- 
munication between  the  urban  and  rural  population  is 
for  their  mutual  advantage  and  that,  as  they  together 
constitute  the  public  for  whose  use  and  general  wel- 
fare highways  are  dedicated  and  communication  estab- 
lished, the  use  is  not  merely  local  but  general  in  scope. 
But  as  the  steam  railway  provides  almost  exclusively 
for  through  rather  than  local  traf^c  and  also  creates 
a  more  serious  burden  and  exclusive  use  of  the  land 
which  it  occupies,  the  courts  agree  in  holding  that  such 
a  user  constitutes  an  additional  servitude. 

§  284.  Tendency  to  extend  municipal  utility  ser- 
vice.— For  the  reason  that  the  street  as  well  as  the 
interurban  electric  system  facilities  travel  and  because 
the  telephone  and  telegraph  system  facilitates  com- 
munication by  wire,  thereby  dispensing  with  the  neces- 
sity of  travel,  and  because  it  is  desirable  that  such 
other  municipal  public  utility  plants  as  furnish  water, 
heat  and  light  be  placed  within  the  reach  of  all,  the 
tendency  of  the  authorities  seems  to  be  to  encourage 

22— Pub.  ut. 


§  285  PUBLIC    UTILITIES.  338 

the  extension  of  these  conveniences  not  only  to  the 
inhabitants  of  the  municipality  but  also  to  the  rural 
population  by  defining  the  term  "public  use,"  for  which 
the  highway  is  dedicated,  so  comprehensively  as  to 
permit  of  the  installation  of  the  different  systems  fur- 
nishing these  utilities  without  any  payment  as  for 
an  additional  servitude. 

§  285.  Streets  and  other  highways  not  distin- 
guished.— Other  authorities,  however,  still  require  pay- 
ment to  be  made  for  such  uses  of  the  highway  on  the 
theory  that  they  do  constitute  additional  servitudes 
that  were  not  contemplated  at  the  time  of  the  dedica- 
tion nor  fairly  included  within  the  purposes  of  the 
dedication.  The  distinction  which  was  formerly  made 
between  the  street  and  the  rural  highway  as  to  the 
uses  for  which  they  were  respectively  dedicated  no 
longer  obtains  as  a  general  principle,  and  some  of  the 
leading  cases  which  find  that  the  installation  of  the 
equipment  necessary  to  furnish  the  public  utility  ser- 
vice constitutes  an  additional  servitude  admit  that 
there  is  no  reason  for  distinguishing  between  the  mu- 
nicipal and  the  rural  highway.  Nor  is  the  distinction 
now  recognized  which  formerly  obtained  between  the 
use  of  the  street  where  the  fee  is  in  the  municipality 
and  where  it  remains  in  the  abutting  property  owner 
because  the  ownership  of  the  fee  does  not  change  or 
necessarily  affect  the  purposes  for  which  the  streets 
or  highways   are   dedicated. 

§  286.  Expedient  to  encourage  extensions. — Fin- 
ally as  our  general  highway  system  is  provided  and 
controlled  by  the  state  in  the  general  interest  and  for 
the  benefit  of  its  population  at  large  for  the  purpose 
of  transportation  and  communication,  it  would  seem 
that    from   a   practical    standpoint   any   reasonable    use 


339  ADDITIONAL   SERVITUDES.  §  287 

of  the  highway  should  be  permitted  which  is  public 
in  its  nature  and  has  for  its  purpose  the  extension  of 
one  or  more  of  the  modern  conveniences  afforded  by- 
municipal  public  utilities  to  the  public  or  a  larger 
part  of  it,  and,  as  it  is  to  the  general  interest  of  the 
public  that  these  conveniences  be  extended,  public 
policy  or  the  general  welfare  would  justify  the  courts 
in  holding  that  not  only  is  no  additional  servitude 
thereby  created,  but  rather  that  additional  facilities 
are  afforded  to  the  abutting  property  owner  and  the 
public  except  in  those  cases  where  there  is  no  local 
benefit  or  advantage  to  the  abutting  property  owner 
because  the  service  is  not  local,  in  which  cases  because 
of  such  fact  the  courts  very  properly  find  that  an  addi- 
tional servitude  is  imposed  for  which  compensation 
should  be  made. 

§  287.  Decisions  conflicting. — However,  as  before 
stated,  the  authorities  are  by  no  means  agreed  as  to 
what  constitutes  an  additional  servitude  in  connection 
with  the  establishment  and  operation  of  municipal 
public  utilities,  and  because  of  this  conflict  in  the 
authorities  they  are  referred  to  and  discussed  at  length 
for  the  purpose  of  indicating  and  explaining  as  far  as 
possible  the  attitude  of  the  different  courts  on  this 
important  phase  of  the  law  and  its  practical  applica- 
tion concerning  municipal  public  utilities.^ 

1  ALABAMA.— Hobbs  v.  Long  Distance  Tel.  &  T.  Co.,  147  Ala. 
393,  41  So.  1003,  7  L.  R.  A.  (N.  S.)  87;  Southern  Bell  Tel.  Co.  v. 
Francis,  109  Ala.  224,  19  So.  1,  31  L.  R.  A.  193,  55  Am.  St.  930;  Birm- 
ingham Ry.  Light  &  Power  Co.  v.  Smyer   (Ala.),  61   So.  354. 

CALIFORNIA.— Gurnsey  v.  Northern  California  Power  Co.,  160 
Cal.  699,  117  Pac.  906,  36  L.  R.  A.  (N.  S.)  185. 

FEDERAL.— Kester  v.  Western  Union  Tel.  Co.,  108  Fed.  926; 
Pacific  Postal  Tel.  Cable  Co.  v.  Irvine,  49  Fed.  113;  Postal  Tel. 
Cable  Co.  v.  Southern  R.  Co.,  89  Fed.  190. 

ILLINOIS.— Board  of  Trade  Tel.  Co.  v.  Barnett,  107  111.  507,  47 
Am.  Rep.  453;  Burrall  v.  American  Tel.  &  T.  Co.,  224  111.  266,  79  N. 
E.  705;   Carpenter  v.  Capital  Electric  Co.,  178  111.  29.  52  N.  E.  973, 


§  288  PUBLIC    UTILITIES.  340 

§  288.  Communication  by  wire  in  lieu  of  travel. 
— Many  decisions  hold  that  no  additional  servitude  is 

43  L.  R.  A.  645.  69  Am.  St.  286;  McWethy  v.  Aurora  Electric  Light 
&  Power  Co.,  202  III.  218,  67  N.  E.  9;  Postal  Tel.  Cable  Co.  v.  Eaton, 
170  111.  513,  49  N.  E.  365,  39  L.  R.  A.  722,  62  Am.  St.  390. 

INDIANA.— Coburn  v.  New  Tel.  Co.,  156  Ind.  90,  59  N.  E.  324, 
52  L.  R.  A.  671;  Eichels  v.  Evansville  St.  R.  Co.,  78  Ind.  261,  41  Am. 
Rep.  561;  Kincaid  v.  Indianapolis  Natural  Gas  Co.,  124  Ind.  577,  24 
N.  E.  1066,  8  L.  R.  A.  602,  19  Am.  St.  113;  Kinsey  \r.  Union  Traction 
Co.,  169  Ind.  563,  81  N.  E.  922;  Magee  v.  Overshiner,  150  Ind.  127,  49 
N.  E.  951,  40  L.  R.  A.  370,  60  L.  R.  A.  426,  65  Am.  St.  358;  Mordhurst 
V.  Ft.  Wayne  &  S.  W.  Traction  Co.,  163  Ind.  268,  71  N.  E.  642,  66 
L.  R.  A.  105,  103  Am.  St.  222;  Pittsburg,  C,  C.  &  St.  L.  R.  Co.  v. 
Muncie  &  Portland  T.  Co.,  174  Ind.  167,  91  N.  E.  600. 

KANSAS.— McCann  v.  Johnson  County  Tel.  Co.,  69  Kans.  212, 
76  Pac.  870. 

KENTUCKY.— Cumberland  Tel.  &  T.  Co.  v.  Avritt,  120  Ky.  34, 
85  S.  W.  204. 

LOUISIANA.— Irwin  v.  Great  Southern  Tel.  Co.,  37  La.  Ann.  63. 

MARYLAND.— Chesapeake  &  P.  Tel.  Co.  v.  Mackenzie,  74  Md. 
36,  21  Atl.  690,  28  Am.  St.  219;  Telegraph  Co.  v.  Smith  (Md.),  18  Atl. 
910,  7  L.  R.  A.  200. 

MASSACHUSETTS.— Cheney  v.  Barker,  198  Mass.  356,  84  N.  E. 
492;  New  England  Tel.  &  T.  Co.  v.  Boston  Terminal  Co.,  182  Mass. 
397,  65  N.  E.  835;  Pierce  v.  Drew,  136  Mass.  75,  49  Am.  Rep.  7;  Sears 
V.  Crocker,  184  Mass.  586,  69  N.  E.  327,  100  Am.  St.  577. 

MICHIGAN.— People  v.  Eaton,  100  Mich.  208,  59  N.  W.  145,  24 
L.  R.  A.  721. 

MINNESOTA.— Cater  v.  Northwestern  Tel.  Exch.  Co.,  60  Minn. 
539,  63  N.  W.  Ill,  28  L.  R.  A.  310,  51  Am.  St.  543. 

MISSISSIPPI.— Gulf  Coast  Ice  Mfg.  Co.  v.  Bowers,  80  Miss.  570, 
32  So.  113;  Stowers  v.  Postal  Tel.  Cable  Co.,  68  Miss.  559,  9  So.  356, 
12  L.  R.  A.  S64,  24  Am.  St.  290. 

MISSOURI.— Julia  Bldg.  Assn.  v.  Bell  Tel.  Co.,  88  Mo.  258,  57  Am. 
Rep.  398. 

MONTANA.— Hershfield  v.  Rocky  Mountain  Bell  Tel.  Co.,  12 
Mont.  102,  29  Pac.  883;  Loeber  v.  Butte  General  Electric  Co.,  16 
Mont.  1,  39  Pac.  912,  50  Am.  St.  468. 

NEBRASKA.— Bronson  v.  Albion  Tel.  Co.,  67  Nebr.  Ill,  93  N.  W. 
201,  60  L.  R.  A.  426;  Jaynes  v.  Railroad  Co.,  53  Nebr.  631,  74  N.  W. 
67,  39  L.  R.  A.  751. 

NEW  JERSEY.— Andreas  v.  Gas  &  Electric  Co.,  61  N.  J.  Eq.  69, 
47  Atl.  555;  Broome  v.  Telephone  Co.  (N.  J.  Ch.),  7  Atl.  851;  French 
V.  Robb,  67  N.  J.  L.  260,  51  Atl.  509,  57  L.  R.  A.  956,  91  Am.  St.  433; 
Halsey  v.  Railway  Co.,  47  N.  J.  Eq.  380,  20  Atl.  859;  NicoU  v.  New 


I 


341  ADDITIONAL   SERVITUDES.  §  288 

created  by  the  installation  of  the  equipment  of  poles 
and  wires  necessary  in  the  communication  of  intelli- 
gence by  wire  for  the  reason  that  the  highway  is  dedi- 
cated for  the  purpose  of  transportation  and  conveyance 
of  passengers  and  property  and  also  for  the  transmis- 
sion of  intelligence,  and  that  communication  either  by 
travel  or  message  in  lieu  thereof  is  a  proper  use  of  the 

York  &  X.  J.  Tel.  Co.,  62  X.  J.  L.  733,  42  Atl.  583,  72  Am.  St.  666; 
Taylor  v.  Public  Service  Corp.,  75  N.  J.  Eq.  371,  73  Atl.  118. 

NEW  YORK.— Board  of  Rapid  Transit  R.  Comrs.,  In  re,  197  N. 
Y.  81,  90  N.  E.  456,  36  L.  R.  A.  (N.  S.)  647,  18  Ann.  Cas.  366;  Eels 
V.  American  Tel.  &  T.  Co.,  143  N.  Y.  133,  38  N.  E.  202,  25  L.  R.  A.  640; 
Johnson  v.  Thomson-Houston  Electric  Co.,  7  N.  Y.  S.  716,  54  Hun 
(N.  Y.)  469;  Metropolitan  Tel.  &  T.  Co.  v.  Colwell  Lead  Co.,  67  How. 
Pr.  365;  Palmer  v.  Larchmont  Electric  Co.,  158  N.  Y.  231,  52  N.  E. 
1092,  43  L.  R.  A.  672;  Rasch  v.  Nassau  Electric  R.  Co.,  198  N.  Y. 
385,  91  N.  E.  785. 

NORTH  CAROLINA.— Smith  v.  Goldsboro,  121  N.  Car.  350,  28 
S.  E.  479. 

NORTH  DAKOTA.— Cosgriff  v.  Tri-State  Tel.  &  T.  Co.,  15  N. 
Dak.  210,  107  N.  W.  525,  5  L.  R.  A.  (N.  S.)  1142;  Donovan  v.  AUert, 
11  N.  Dak.  289,  91  N.  W.  441,  58  L.  R.  A.  775. 

OHIO.— Callen  v.  Columbus  Edison  Electric  Light  Co.,  66  Ohio 
St.  166,  64  N.  E.  141,  58  L.  R.  A.  7S2;  Daily  v.  State,  51  Ohio  St.  348, 
37  N.  E.  710,  24  L.  R.  A.  724,  46  Am.  St.  578;  Schaaf  v.  Cleveland,  M. 
&  S.  R.  Co.,  66  Ohio  St.  215,  64  N.  E.  145. 

PEXXSYLVANIA.— Brown  v.  Radnor  Tp.  Electric  Light  Co., 
208  Pa.  453,  57  Atl.  904;  Lockhart  v.  Craig  Street  R.  Co.,  139  Pa.  419, 
21  Atl.  26;  York  Tel.  Co.  v.  Keesey,  5  Pa.  Dist.  R.  366. 

RHODE  ISLAND.- Taggart  v.  Xewport  Street  R.  Co.,  16  R.  I. 
668,  19  Atl.  326,  7  L.  R.  A.  205. 

SOUTH  DAKOTA.— Kirby  v.  Citizens'  Tel.  Co.,  17  S.  Dak.  362,  97 
N.  W.  3. 

TENNESSEE.— Frazier  v.  East  Tennessee  Tel.  Co.,  115  Tenn. 
416,  90  S.  W.  620,  3  L.  R.  A.  (N.  S.)  323,  112  Am.  St.  856. 

VIRGINIA.— Wagner  v.  Bristol  Belt  Line  R.  Co.,  108  Va.  594, 
62  S.  E.  391;  Western  Union  Tel.  Co.  v.  Williams,  86  Va.  696,  11  S. 
E.  106,  8  L.  R.  A.  429,  19  Am.  St.  908. 

WASHINGTON.— Spokane  v.  Colby,  16  Wash.  610,  48  Pac.  248. 

WEST  VIRGINIA.— Lowther  v.  Bridgeman,  57  W.  Va.  306,  50 
S.  E.  410. 

WISCONSIN.— Krueger  v.  Wisconsin  Tel.  Co.,  106  Wis.  96,  81  N. 
W.  1041,  50  L.  R.  A.  298. 


§  288  PUBLIC    UTILITIES.  342 

highway  because  both  are  public  and  the  object  to  be 
accompHshed  in  either  is  identical,  the  only  ground  of 
distinction  being  the  method  by  which  the  object  is 
accomplished.  A  number  of  the  courts  therefore  al- 
most from  the  very  beginning  of  the  use  of  the  tele- 
graph and  telephone  have  held  that  this  did  not  con- 
stitute an  additional  servitude  on  the  highway,  but 
that  it  was  merely  a  better  and  more  modern  method 
of  communication,  the  use  of  which  in  the  public  in- 
terest should  be  extended  and  encouraged  and  not 
handicapped  by  a  payment  as  for  an  additional  servi- 
tude for  permission  to  install  the  necessary  equip- 
ment. The  Supreme  Court  of  Massachusetts  as  early 
as  1883  in  the  case  of  Pierce  v.  Drew,  136  Mass.  75, 
49  Am.  Rep.  7,  which  has  since  become  a  leading  one, 
enunciated  this  principle  concerning  the  law  of  mu- 
nicipal public  utilities  and  gave  it  application  in  this 
connection  for  the  practical  reason,  as  the  court  said, 
that:  "When  the  land  was  taken  for  a  highway,  that 
which  was  taken  was  not  merely  the  privilege  of  trav- 
eling over  it  in  the  then  known  vehicles,  or  of  using 
it  in  the  then  known  methods,  for  either  the  convey- 
ance of  property  or  transmission  of  intelligence. 
.  .  .  The  discovery  of  the  telegraph  developed  a 
new  and  valuable  mode  of  communicating  intelli- 
gence. Its  use  is  certainly  similar  to,  if  not  identical 
with,  that  public  use  of  transmitting  information  for 
which  the  highway  was  originally  taken,  even  if  the 
means  adopted  are  quite  different  from  the  post-boy 
or  the  mail-coach.  It  is  a  newly  discovered  method  of 
exercising  the  old  public  easement,  and  all  appropriate 
methods  must  have  been  deemed  to  have  been  paid 
for  when  the  road  was  laid  out.  .  .  .  We  are 
therefore  of  opinion  that  the  use  of  a  portion  of  a 
highway  for  the  public  use  of  companies  organized 
under  the   laws   of  the   state   for  the   transmission   of 


343  ADDITIONAL    SERVITUDES.  §  289 

intelligence  by  electricity,  and  subject  to  the  super- 
vision of  the  local  municipal  authorities,  which  has 
been  permitted  by  the  legislature,  is  a  public  use 
similar  to  that  for  which  the  highway  was  originally 
taken,  or  to  which  it  was  originally  devoted,  and  that 
the  owner  of  the  fee  is  entitled  to  no  further  com- 
pensation." 

§  289.  Public  use  not  additional  servitude. — 
Twenty  years  later  this  same  court  in  the  case  of  New 
England  Tel.  &  T.  Co.  v.  Boston  Terminal  Co.,  182 
Mass.  397,  65  N.  E.  835,  reiterated  this  principle  and 
extended  its  application  to  practically  all  municipal 
public  utilities  including  those  installed  beneath  the 
surface  of  the  ground  as  well  as  those  above  or  upon 
its  surface.  In  holding  that  full  payment  is  made  to 
the  abutting  property  owner  at  the  time  the  street  is 
dedicated  covering  practically  all  public  uses  to  which 
it  may  be  subjected  in  connection  with  the  operation 
of  any  municipal  public  utility  available  at  the  time 
of  such  dedication  or  which  may  be  invented  in  the 
future,  the  court  said:  "In  this  commonwealth,  on  the 
laying  out  and  construction  of  a  highway  or  public 
street,  the  fee  of  the  land  remains  in  the  landowner, 
and  the  public  acquire  an  easement  in  the  street  for 
travel.  This  easement  is  held  to  include  every  kind  of 
travel  and  communication  for  the  movement  or  trans- 
portation of  persons  or  property  which  is  reasonable 
and  proper  in  the  use  of  a  public  street.  It  includes 
the  use  of  all  kinds  of  vehicles  which  can  be  intro- 
duced with  a  reasonable  regard  for  the  safety  and 
convenience  of  the  public,  and  every  reasonable  means 
of  transportation,  transmission,  and  movement  be- 
neath the  surface  of  the  ground,  as  well  as  upon  or 
above  it.  Accordingly  it  has  been  held  that  the  public 
easement   which   is   paid  for  in   assessing  damages   to 


§  290  PUBLIC    UTILITIES.  344 

the  owner  includes  the  use  of  the  street  for  horse  cars 
and  electric  cars,  for  wires  of  telegraph,  telephone,  and 
electric  lighting  companies,  and  for  water  pipes,  gas 
pipes,  sewers,  and  such  other  similar  arrangements 
for  communication  or  transportation  as  further  in- 
vention may  make  desirable." 

§  290.  Public  rights  paramount  after  dedication. 
— The  practical  attitude  and  the  progressive  spirit  of 
this  court,  which  has  been  followed  by  many  others, 
are  indicated  in  its  decision  in  the  case  of  Sears  v. 
Crocker,  184  Mass.  586,  69  N.  E.  327,  100  Am.  St. 
577,  decided  in  1904,  where  the  court  held  that  abut- 
ting property  owners  are  "bound  to  withdraw  from 
occupation  of  streets  above  or  below  the  surface  when- 
ever the  public  needs  the  occupied  space  for  travel" 
for  the  reason  that  "the  necessary  requirements  of 
the  public  for  travel  were  all  paid  for  when  the  land 
was  taken,  whatever  they  may  be,  and  whether  the 
particulars  of  them  were  foreseen  or  not,"  for  as  the 
court  says :  "It  is  now  a  fact  of  common  knowledge 
that  the  streets  of  those  parts  of  Boston  which  are 
most  crowded  are  entirely  inadequate  to  accommodate 
the  public  travel  in  a  reasonably  satisfactory  way  if 
the  surface  alone  is  used.  Our  system,  which  leaves 
to  the  landowner  the  use  of  a  street  above  or  below 
or  on  the  surface,  so  far  as  he  can  use  it  without 
interference  with  the  rights  of  the  public,  is  just  and 
right,  but  the  public  rights  in  these  lands  are  plainly 
paramount,  and  they  include,  as  they  ought  to  include, 
the  power  to  appropriate  the  streets  above  or  below 
the  surface  as  well  as  upon  it  in  any  way  that  is  not 
unreasonable,  in  reference  either  to  the  acts  of  all  who 
have  occasion  to  travel  or  to  use  the  effect  upon  the 
property  of  abutters." 


345  ADDITIONAL   SERVITUDES.  §  29 1 

§  291.  Public  entitled  to  underground  use  of 
streets. — This  court  further  extends  the  appHcation 
of  this  principle  in  the  case  of  Cheney  v.  Barker,  198 
Mass.  356,  84  N.  E.  492,  decided  in  1908,  by  refusing 
to  find  that  the  laying  of  pipe  lines  through  and  under 
a  public  street  imposes  an  additional  servitude  for 
which  the  abutting  property  owner  is  entitled  to  com- 
pensation for  it  is  a  reasonable  use  required  by  public 
necessity  and  convenience  to  which  the  public  is  en- 
titled without  further  payment  for  the  reason  that,  as 
the  court  says :  "The  landowners  get  the  full  value 
of  their  land  in  such  cases,  if  there  is  any  injustice  it 
is  not  they  who  suffer  it.  .  .  .  The  same  doctrine 
has  been  applied  to  such  underground  uses  of  the  pub- 
lic streets  as  the  laying  of  common  sewers,  main 
drains,  water  pipes,  conduits,  subways,  and  gas  mains, 
either  by  private  companies  or  by  officers  acting  for 
the  public.  .  .  .  We  can  not  doubt  the  power  of 
the  legislature  to  authorize  the  laying  of  lines  of  gas 
pipes  under  the  surface  of  the  pubHc  streets  without 
providing  any  compensation  for  the  owners  of  the  fee 
in  the  soil  of  those  streets.  .  .  .  Our  roads  or 
public  ways  are  established  for  the  common  good  and 
for  the  use  and  benefit  of  all  the  inhabitants  of  the 
commonwealth.  The  mere  fact  that  the  burden  of 
their  construction  and  maintenance  has  to  a  large 
extent  been  put  upon  the  cities  and  towns  in  which 
they  are  situated  gives  to  those  cities  or  towns  or  to 
their  inhabitants  no  peculiar  privileges  in  such  ways." 

§  292.  Travel  in  streets  relieved  by  telephone. — 
The  Supreme  Court  of  Missouri  in  the  case  of  Julia 
Bldg.  Assn.  V.  Bell  Tel.  Co.,  88  Mo.  258,  57  Am.  Rep. 
398,  decided  in  1885,  furnishes  an  early  authority 
which  has  long  since  been  regarded  as  also  a  leading 
one  indicating  the  favorable  attitude  of  that  jurisdic- 


§  291  PUBLIC    UTILITIES.  346 

tion  in  encouraging  the  extension  of  municipal  public 
utility  service  by  holding  that  the  installation  of  the 
necessary  equipment  to  render  such  service  does  not 
constitute  an  additional  servitude  or  burden  for  which 
payment  must  be  made.  This  case  probably  furnishes 
the  strongest  argument  in  support  of  the  more  pro- 
gressive authorities  to  this  effect  in  the  following  lan- 
guage: "These  streets  are  required  by  the  public  to 
promote  trade  and  facilitate  communications  in  the 
daily  transaction  of  business  between  the  citizens  of 
one  part  of  the  city  with  those  of  another,  as  well  as 
to  accommodate  the  public  at  large  in  these  respects. 
If  a  citizen  living  or  doing  business  on  one  end  of 
Sixth  street  wishes  to  communicate  with  a  citizen 
living  and  doing  business  on  the  other  end,  or  at  any 
intermediate  point  he  is  entitled  to  use  the  street, 
either  on  foot,  on  horseback,  or  in  a  carriage,  or  other 
vehicle  in  bearing  his  message.  The  defendants  in 
this  case  propose  to  use  the  street  by  making  the  tele- 
phone poles  and  wires  the  messenger  to  bear  such 
communications  instantaneously  and  with  more  dis- 
patch than  in  any  of  the  above  methods,  or  any  other 
known  method  of  bearing  oral  communications.  Not 
only  would  such  communications  be  borne  with  more 
dispatch,  but  to  the  extent  of  the  number  of  com- 
munications daily  transmitted  by  it,  the  street  would 
be  relieved  of  that  number  of  footmen,  horsemen  or 
carriages.  If  a  thousand  messages  were  daily  trans- 
mitted by  means  of  telephone  poles,  wires  and  other 
appliances  used  in  telephoning,  the  street  through  these 
means  would  serve  the  same  purpose,  which  would 
otherwise  require  its  use  either  by  a  thousand  foot- 
men, horsemen  or  carriages  to  effectuate  the  same 
purpose.  In  this  view  of  it  the  erection  of  telephone 
poles  and  wires  for  transmission  of  oral  messages, 
so  far  from  imposing  a  new  and  additional  servitude, 


347  ADDITIONAL   SERVITUDES.  §  293 

would,  to  the  extent  of  each  message  transmitted,  re- 
lieve the  street  of  a  servitude  or  use  by  a  footman, 
horseman  or  carriage." 

§  293,  Lighting  system  no  additional  servitude. 
— That  the  use  for  which  streets  and  highways  are 
dedicated  is  enhanced  and  extended  by  their  being 
properly  lighted  is  the  effect  of  the  decision  in  the  case 
of  Gulf  Coast  Ice  Mfg.  Co.  v.  Bowers,  80  Miss.  570, 
32  So.  113,  decided  in  1902,  where  the  court  in  per- 
mitting the  erection  of  the  necessary  equipment  for 
the  purpose  of  lighting  the  streets  observed  that  of 
necessity  the  easements  in  the  use  of  the  streets  of 
the  municipality  are  greater  than  in  that  of  other 
highways  and  that  the  interest  of  the  public  rather 
than  of  the  abutting  property  owner  must  determine 
the  extent  of  the  reasonable  uses  to  which  the  streets 
may  be  subjected,  and  held  that  no  additional  servi- 
tude was  created,  for  as  the  court  says:  "While  the 
lighting  of  the  streets  of  a  city  may  be  a  great  con- 
venience to  the  traveling  public,  especially  under  some 
conditions,  the  poles,  wires,  and  other  necessary  appli- 
ances for  so  doing  are  often  a  positive  inconvenience 
to  the  abutting  landowner,  considered  merely  as  such. 
But  the  proprietary  rights  of  the  landowner,  whether 
the  fee  or  a  mere  easement  thereon  be  in  the  public 
(Theobold  v.  Railway  Co.,  66  Miss.  279,  6  So.  230.  4 
L.  R.  A.  735,  14  Am.  St.  R.  564),  are  greatly  modified 
by  the  rights  of  the  public,  which  is  entitled  to  a  free 
passage  over  the  streets,  and  to  the  benefit  of  lights 
constructed  and  operated  for  that  end.  And  if  a 
town  or  city  may  light  its  streets,  as  being  an  object 
for  which  the  street  is  opened,  without  paying  the 
abutting  property  owner  damages  for  the  erection  of 
needed    appliances    therefor,    it    must    follow    that    the 


§  294  PUBLIC    UTILITIES.  348 

municipal  authorities  may  authorize  some  other  per- 
son to  furnish  such  lights." 

§  294.  Modem  inprovements  included  in  "public 
purpose." — The  rapid  growth  of  municipalities  result- 
ing in  the  constant  extension  of  their  limits  into  what 
had  been  rural  districts,  thereby  converting  country 
highways  into  municipal  streets  furnishes  a  positive 
practical  reason  for  the  courts  refusing  to  limit  the 
uses  of  the  streets  and  other  highways  to  those  con- 
templated by  the  parties  at  the  time  of  the  dedication. 
It  is  obvious  that  such  a  rule  would  not  only  prohibit 
the  growth  of  municipalities  and  the  extension  of 
their  territorial  limits,  but  that  it  would  impede 
progress  resulting  from  new  inventions  and  modern 
improvements  which  advancing  civilization  affords. 
The  term  "public  uses"  for  which  the  streets  and  high- 
ways are  dedicated  therefore  are  not  only  such  uses 
as  walking,  riding  or  traveling  in  vehicles  drawn  by 
animals,  but  also  such  methods  of  travel  and  com- 
munication as  is  afforded  by  the  street  car  operated 
by  electricity,  the  automobile  and  such  other  methods 
of  travel  and  communication  in  addition  to,  or  by  way 
of  substitution  for  those  in  vogue  at  the  time  of  the 
dedication  as  may  result  from  future  invention  and 
further  progress;  all  of  which  both  reason  and  neces- 
sity require  shall  be  recognized  and  accepted  as  proper 
and  reasonable  uses  of  the  street  for  transportation 
and  communication,  for  as  the  Supreme  Court  of  In- 
diana in  the  case  of  Magee  v.  Overshiner,  150  Ind.  127, 
49  N.  E.  951,  40  L.  R.  A.  370,  60  L.  R.  A.  426,  65  Am. 
St.  358,  decided  in  1898,  says:  "If  this  were  not  true, 
the  way  originally  dedicated  for  a  suburban  highway, 
but  by  the  growth  of  population  becoming  a  city  street, 
or  the  dedication  of  a  village  or  town  street  afterwards 
becoming  the   principal   thoroughfare   of  a   great   city, 


349  ADDITIONAL   SERVITUDES.  §  295 

would  be  limited  to  the  uses  in  vogue  at  the  time  and 
suited  to  the  country  road  or  the  village  or  town 
street;  and  the  growth  of  population,  the  advancement 
of  commerce,  and  the  increase  in  inventions  for  the 
aid  of  mankind  would  be  required  to  adjust  themselves 
to  the  conditions  existing  at  the  time  of  the  dedica- 
tion, and  with  reference  to  the  uses  then  actually- 
contemplated."  Concluding  its  opinion,  which  fur- 
nishes an  excellent  discussion  of  the  authorities  on  this 
point  and  a  practical  disposition  of  the  matter,  to  the 
effect  that  the  use  of  the  streets  for  the  equipment  of  a 
telephone  system  does  not  constitute  an  additional 
servitude  for  which  the  abutting  property  owner  is 
entitled  to  compensation,  the  court  says:  "The  tele- 
graph, however,  has  never  been  employed  as  a  means 
of  intraurban  communication.  It  requires  skilled  per- 
sons to  receive  the  messages,  and  then  they  are  to  be 
carried  to  the  persons  for  whom  they  are  intended 
by  just  such  means  and  uses  of  the  streets  as  would 
other  written  communications.  The  telephone  is  par- 
ticularly useful  in  communications  between  the  people 
within  a  city,  and  it  can  be  used  for  that  purpose 
directly,  and  by  persons  without  special  skill.  It  is 
more  clearly  a  substitute  for  the  old  methods  of  the 
communication  of  messages  between  persons  within  the 
city  than  the  telegraph." 

§  295.  Necessary  underground  conduits  included. 
— In  holding  that  the  construction  in  the  street  of  a 
conduit  for  telephone  cables  and  wires  for  the  use 
of  the  public  in  communicating  by  electricity  is  a  use 
of  the  street  entirely  consistent  with  the  purposes  of 
its  dedication  and  does  not  constitute  an  additional 
servitude,  the  same  court  in  the  case  of  Coburn  v.  New 
Tel.  Co..  156  Ind.  90,  59  N.  E.  324.  52  L.  R.  A.  671, 
decided  in  1901,  says:     "The  general  doctrine  of  these 


§  296  PUBLIC    UTILITIES.  35O 

cases  is  that  in  locating,  marking,  and  dedicating 
streets  in  plats  of  land  for  urban  residences,  the  pur- 
pose of  the  dedication,  in  the  absence  of  controlling 
language,  is  conclusively  presumed  to  be  for  the  ac- 
commodation of  pubhc  travel,  traffic,  and  communi- 
cation. Anything  w^hich  reasonably  facilitates  these 
ends  is,  therefore,  consistent  with  the  dedication. 
.  .  .  Whenever  the  necessity  exists,  any  use  of  the 
street  by  reasonable  structures  and  devices,  above  or 
below  the  surface,  which  will  enable  the  citizens  to 
communicate  without  actual  travel  upon  the  streets, 
and  which  does  not  materially  obstruct  the  ingress 
and  egress  and  light  and  air  of  abutting  property,  is 
within  the  contemplated  purpose  of  the  dedication, 
and  not  a  new  burden  upon  the  fee." 

§  296.  Streets  and  other  highways  formerly  dis- 
tinguished.— By  way  of  illustration  of  the  distinction 
in  the  nature  and  extent  of  the  servitude  in  the  street 
and  country  highway  respectively  which  was  fre- 
quently made  by  the  earlier  decisions,  the  case  of 
Kincaid  v.  Indianapolis  Natural  Gas  Co.,  124  Ind.  577, 
24  N.  E.  1066,  8  L.  R.  A.  602,  19  Am.  St.  113,  decided 
in  1890,  is  of  interest  although  it  can  not  be  said  to 
represent  the  current  authority  nor  the  prevailing 
tendency  of  the  decisions  in  making  such  distinction. 
In  permitting  a  recovery  of  damages  for  the  invasion 
of  the  rights  of  the  abutting  property  owner  from  the 
laying  of  gas  pipe  lines  in  the  country  highway,  this 
court  made  a  strict  literal  construction  and  a  conserva- 
tive application  of  the  principle  under  discussion.  In 
the  course  of  its  opinion  the  court  said:  "The  rule 
declared  by  our  own  cases  is  in  harmony  with  the 
very  ancient  and  well-settled  rule  that  the  public  ac- 
quires, except  in  cases  where  the  seizure  of  the  fee  is 
authorized,  nothing  more  than  a  right  to  pass  and  re- 


351  ADDITIONAL   SERVITUDES.  §  297 

pass,  and  the  great  weight  of  authority  sustains  the 
doctrine  laid  down  by  our  decisions.  There  is  an 
essential  distinction  between  urban  and  suburban 
highways,  and  the  rights  of  abutters  are  much  more 
Hmited  in  the  case  of  urban  streets  than  they  are  in 
the  case  of  suburban  ways.  .  .  .  The  authorities, 
although  not  very  numerous,  are  harmonious  upon 
the  question  that  laying  gas  pipes  in  a  suburban  road 
is  the  imposition  of  an  additional  burden,  and  that 
compensation  must  be  made  to  the  owner."  This 
case  was  followed  in  Consumers  Gas  Trust  Co.  v. 
Huntsinger,  12  Ind.  App.  285,  40  N.  E.  34,  decided 
in  1895. 

§  297.  Distinction  no  longer  obtains. — The  case 
of  Mordhurst  v.  Ft.  Wayne  &  S.  W.  Traction  Co.,  163 
Ind.  268,  71  N.  E.  642,  66  L.  R.  A.  105,  103  Am.  St. 
222,  decided  in  1904,  furnishes  a  progressive  decision 
which  is  abreast  of  any  of  the  recent  cases  and  ma- 
terially modifies  the  rule  of  the  Kincaid  case  decided 
by  the  same  court.  While  conceding  that  the  abutting 
property  owner  is  entitled  to  recover  any  actual  spe- 
cial damages  sustained  by  reason  of  the  construction 
and  operation  of  the  interurban  electric  traction  line, 
this  court  distinguished  such  a  use  of  the  street  from 
that  of  the  steam  railway  and  refused  to  find  that  it 
constituted  an  additional  servitude,  for  as  the  court 
observes  in  the  course  of  its  well  reasoned  opinion: 
"It  is  apparent  that  every  objection  founded  upon  in- 
jury to  his  property  rights  which  the  plaintiff  can  justly 
urge  against  the  use  by  the  defendant  of  Fulton  street 
in  front  of  plaintiff's  lots  would  apply  with  equal  force 
to  the  use  of  that  thoroughfare  by  an  electric  street 
railroad  constructed  and  operated  wholly  within  the 
city  limits.  But  this  court  has  held  that  such  a  street 
railroad  is  not   an   additional  burden   upon   the   street, 


S  297  PUBLIC    UTILITIES.  352 

and  that  the  owners  of  abutting  real  estate  are  not 
entitled  to  compensation  on  account  of  such  appro- 
priation and  use.  Eichels  v.  Evansville  Street  R.  Co., 
y2>  Ind.  261,  41  Am.  R.  561,  Chicago,  &c.,  R.  Co.  v. 
Whiting,  &c.,  R.  Co.,  139  Ind.  297,  38  N.  E.  604,  26 
L.  R.  A.  337,  47  Am.  St.  R.  264.  ...  A  street 
platted  or  otherwise  laid  out  in  a  city  or  town  of  this 
state  is  thereby  dedicated  to  the  use  of  the  public,  and 
not  exclusively  to  the  use  of  abutting  property,  or  to 
the  convenience  or  profit  of  any  or  all  of  the  inhabi- 
tants of  the  particular  municipality.  It  forms  a  part 
of  the  great  system  of  highways  of  the  state,  and  its 
use  for  intercommunication  with  other  neighborhoods, 
towns,  and  cities  is  one  of  its  most  important  purposes. 
In  many  respects  it  is  governed  by  the  general  laws 
regulating  public  ways.  Discriminations  in  the  terms 
and  conditions  on  which  it  could  be  used  in  favor  of 
the  abutting  lot  owners,  the  residents  on  the  particu- 
lar street,  or  the  inhabitants  of  the  city,  and  against 
nonresidents,  could  not  be  tolerated.  The  dedication 
of  a  street  must  be  presumed  to  have  been  made,  not 
for  such  purposes  and  uses  only  as  were  known  to 
the  landowner  and  platter  at  the  time  of  such  dedica- 
tion, but  for  all  public  purposes,  present  and  prospec- 
tive, consistent  with  its  character  as  a  public  highway, 
and  not  actually  detrimental  to  the  abutting  real 
estate.  .  .  .  Rapid  and  cheap  transportation  of 
passengers,  light  express  and  mail  matter,  between 
neighboring  towns  and  cities  may  be  quite  as  neces- 
sary and  as  largely  conducive  to  the  general  welfare 
of  the  places  so  connected  and  their  inhabitants  as 
the  like  conveniences  within  the  town  or  city.  Where 
such  transportation  is  furnished  by  an  interurban 
electric  railroad  operated  under  the  conditions  and 
restrictions  contained  in  the  agreement  between  the 
appellee  and  the  city  of  Ft.  Wayne,  we  do  not  think 


T,^^  ADDITIONAL    SERVITUDES.  §  298 

the  construction  and  operation  of  such  a  railroad  in 
such  a  manner  constitutes  an  additional  servitude 
upon  the  street  which  entitles  abutting  property  own- 
ers to  compensation." 

§  298.  Steam,  street  and  interurban  railways  dis- 
tinguished.— This  decision  is  limited,  however,  by  that 
of  the  same  court  in  the  case  of  Kinsey  v.  Union  Trac- 
tion Co.,  169  Ind.  563,  81  N.  E.  922,  decided  in  1907, 
which  is  also  concerned  with  the  maintenance  and 
operation  of  an  interurban  electric  traction  line.  And 
while  the  court  in  this  case  also  expressly  refused 
to  find  that  such  a  user  constituted  an  additional  ser- 
vitude it  upheld  the  right  of  the  abutting  property 
owner  to  recover  any  special  damages  actually  sus- 
tained in  connection  with  the  operation  of  such  an 
electric  line.  The  distinction  in  the  two  cases  is  based 
upon  the  difference  in  the  nature  and  extent  of  the 
business  and  in  the  manner  of  the  operation  of  the 
different  lines;  it  appearing  that  the  latter  case  in 
many  respects  was  fairly  comparable  to  that  of  the 
steam  railway  rather  than  the  ordinary  street  railway, 
for  as  the  court  said:  'Tt  is  shown  to  frequently 
run  passenger  trains  composed  of  three  large  cars, 
and  to  run  daily  freight  trains  of  a  like  number  of 
heavy  cars.  It  is  neither  a  street  railroad  in  fact, 
nor  is  it  in  any  sense  shown  to  be  operated  for  street 
purposes.  To  further  emphasize,  we  have,  under  the 
facts,  a  railroad  which  in  no  sense  is  operated  to 
promote  the  utility  of  the  public  streets  of  the  city 
of  Indianapolis.  It  is  not  merely  engaged  in  doing 
business  between  the  latter  city  and  its  suburbs.  It 
is  not  an  extension  of  a  city  street  railway  over  inter- 
vening territory  between  neighboring  cities  or  towns, 
carrying  passengers  and  light  freight ;  but  it  is  abso- 
lutely  an   independent    railway,    engaged    in    a   general 

23— Pub.  Vi. 


S  299  PUBLIC    UTILITIES.  354 

passenger  and  freight  traffic  between  distant  cities 
and  communities.  Its  cars  are  not  light  and  small 
when  compared  with  those  of  the  ordinary  steam 
roads.  As  a  result  of  its  operation,  the  usual  dis- 
comforts and  annoyances  due  to  the  operation  of  the 
ordinary  steam  roads  are  present,  viz.,  loud  noises, 
dirt,  and  dust,  shaking  or  vibrations  of  the  ground, 
and  other  annoyances  or  detriments  which  afifect  the 
owners  of  abutting  property  situated  on  the  streets 
over  which  the  road  is  operated.  There  is  also  the 
presence  of  danger  or  peril  which  continually  menace 
the  safety  of  persons  using  the  public  street." 

§  299.     Interurban  railway  no  additional  servitude. 

— This  same  court,  again,  in  the  recent  case  of 
Pittsburg,  C,  C.  &  St.  L.  R.  Co.  v.  Muncie  &  Portland 
T.  Co.,  174  Ind.  167,  91  N.  E.  600,  decided  in  1910, 
involving  the  same  question  decided  that  such  a  user 
did  not  constitute  an  additional  servitude,  although  it 
appeared  that  not  only  passengers  but  baggage,  ex- 
press, freight  and  the  United  States  mail  was  carried 
by  the  defendant  company,  for  as  the  court  said :  "It 
is  not  necessary  for  us  to  review  said  cases  cited  by 
appellant,  for  the  reason  that  this  court,  after  a  careful 
consideration  of  all  the  authorities,  has  held  otherwise; 
that  the  same  is  not  such  an  additional  burden  and 
servitude  upon  the  street  as  to  require  an  assessment 
and  payment  of  compensation  to  the  abutting  lot  own- 
ers or  other  owners  of  the  fee  in  the  street  as  a  condi- 
tion precedent  to  the  occupancy  and  use  of  the  street 
by  said  interurban  company,  or  for  which  such  owners 
of  the  fee  in  the  street  are  entitled  to  recover  damages. 
Kinsey  v.  Union  Traction  Company,  169  Ind.  563,  601- 
634,  81  N.  E.  922;  Mordhurst  v.  Ft.  Wayne,  &c.,  Co., 
163  Ind.  268,  71  N.  E.  642,  66  L.  R.  A.  105.  103  Am. 
St.  Rep.  222." 


355  ADDITIONAL   SERVITUDES.  §  3OO 

§  300.  Telephone  lines  additional  servitudes  in 
Illinois. — Although  the  Supreme  Court  of  Illinois  in 
the  case  of  McW'ethy  v.  Aurora  Electric  Light  & 
Power  Co.,  202  111.  218,  67  N.  E.  9,  decided  in  1903, 
observed  that:  "Since  the  discovery  and  use  of  elec- 
tricity for  lighting  purposes,  it  has  generally,  if  not 
universally,  been  held  that,  the  fee  to  public  streets 
being  in  a  municipality,  with  general  power  to  regu- 
late the  use  of  the  same,  such  municipality  may  law- 
fully authorize  private  corporations  or  individuals  to 
erect  electric  light  poles  on  its  streets,  and  stretch 
wires  upon  them,  in  order  to  provide  lights  for  its  own 
use  and  that  of  its  citizens,  provided  that  in  doing  so 
they  do  not  materially  obstruct  the  ordinary  use  of 
the  streets  for  public  travel."  this  same  court  in  the 
case  of  Burrall  v.  American  Tel.  &  T.  Co.,  224  111. 
266,  79  N.  E.  705,  decided  in  1906,  that  the  equip- 
ment necessary  to  operate  a  telephone  line  in  the 
streets  constituted  an  additional  servitude.  In  the 
course  of  its  opinion,  which  is  directly  contrary  to 
the  authorities  above  considered,  the  court  said:  "A 
telephone  line  in  a  public  highway  is  an  additional 
burden  upon  the  fee,  for  which  the  owner  of  the  fee  is 
entitled  to  compensation.  Postal  Telegraph  Co.  v. 
Eaton.  170  111.  513,  49  N.  E.  365,  39  L.  R.  A.  722,  62 
Am.  St.  R.  390.  The  maintenance  and  user  of  the 
telephone  line,  and  the  addition  of  new  crossarms, 
wires,  and  insulators,  constitute  a  continuing  trespass, 
which  equity  has  jurisdiction  to  prevent  by  injunction. 
Carpenter  v.  Capital  Electric  Co.,  178  111.  29,  52  N.  E. 
973,  43  L.  R.  A.  645,  69  Am.  St.  R.  286;  Russell  v. 
Chicago  &  Milwaukee  Electric  Railway  Co.,  205  111. 
155,  68  N.  E.  727.  The  jurisdiction  of  equity  is  not 
denied,  and  there  is  no  pretense  that  the  defendant 
had  any  right  to  appropriate  the  property  of  the  com- 
plainant  to   its   own   use   without   compensation.     The 


§  30I  PUBLIC    UTILITIES.  356 

sole  claim  made  in  support  of  the  decree  is  that  the 
complainant  stood  by  and  permitted  defendant  to  con- 
struct the  line  and  has  not  interfered  with  it  since, 
and  therefore  she  is  not  entitled  to  an  injunction. 

The  fact  that  a  large  number  of  long  distance  tele- 
phone messages  are  sent  over  this  line  daily,  and 
therefore  it  would  be  convenient  for  the  public  to  have 
the  defendant  occupy  complainant's  land,  is  of  no 
importance  whatever.  If  the  land  is  needed  for  a  pub- 
lic use,  the  law  provides  a  way  for  acquiring  it,  and 
the  constitution  prohibits  its  appropriation  for  such  a 
use  without  compensation.  It  was  stipulated  that,  if 
the  defendant  can  not  go  across  this  land,  it  will  have 
to  go  around  it,  and,  of  course,  that  would  be  so 
whether  the  parties  stipulated  the  fact  or  not;  but  the 
defendant  can  procure  the  right  to  impose  the  addi- 
tional burden  on  the  fee  by  proper  proceedings  under 
the  law  of  eminent  domain." 

§  301.  Light  being  necessity  is  not  additional 
servitude. — The  Supreme  Court  of  New  York  in  the 
case  of  Palmer  v.  Larchmont  Electric  Co.,  158  N.  Y. 
231,  52  N.  E.  1092,  43  L.  R.  A.  672,  decided  in  1899, 
held  that  the  erection  of  poles  and  wires  in  the  high- 
way for  the  purpose  of  lighting  them  by  electricity 
does  not  constitute  an  additional  servitude.  In  the 
course  of  this  very  practical  decision,  which  clearly 
represents  the  law  on  this  phase  of  the  subject,  the 
court  recognized  that  the  extent  of  the  easement  of 
user  in  the  street  is  determined  by  the  necessities  of 
the  public  for  whom  they  are  maintained,  for  as  the 
court  says :  "In  the  darkness  of  the  night,  in  crowded 
thoroughfares,  light  is  an  important  aid,  largely  tend- 
ing to  promote  the  convenience,  as  well  as  the  safety, 
of  the  traveling  public.  It  is  not  only  one  of  the  uses 
to  which  the  public  ways  may  be  devoted,  but,  in  the 


357  ADDITIONAL   SERVITUDES.  §  302 

case  of  crowded  thoroughfares,  a  duty  devolves  upon 
the  municipahty  of  supplying  it.  In  such  cases  it  is 
one  of  the  burdens  upon  the  fee  which  must  be  borne 
as  an  incident  to  the  public  right  of  traveling  over  the 
way,  and  is  deemed  one  of  the  uses  for  which  the  land 
was   taken   as  a   public   highway.  .  Light   may 

not  be  necessary  in  an  ordinary  country  highway,  and 
yet  there  may  be  country  roads  in  which  the  travel  is 
so  great  as  to  make  light  a  necessity  in  order  to  avoid 
collisions  and  injuries  in  the  nighttime." 

§  302.  Telephone  system  held  additional  servitude 
in  New  York. — This  court,  however,  in  the  earlier 
case  of  Eels  v.  American  Tel.  &  T.  Co.,  143  N.  Y.  133, 
38  N.  E.  202,  25  L.  R.  A.  640,  decided  in  1894  that 
the  construction  in  the  country  highway  of  the  poles 
and  wires  necessary  to  maintain  and  operate  a  tele- 
phone and  telegraph  system  constitutes  an  additional 
servitude  for  which  the  abutting  property  owner  is 
entitled  to  compensation  for  the  reason  that  this  use  is 
entirely  different  from  that  of  actual  travel  by  the  pub- 
lic. In  the  course  of  this  opinion  which  is  contrary  to 
the  prevailing  current  line  of  decisions  the  court  says: 
"We  think  neither  the  state  nor  its  corporation  can 
appropriate  any  portion  of  the  public  highway  perma- 
nently to  its  own  special,  continuous,  and  exclusive  use 
by  setting  up  poles  therein,  although  the  purpose  to 
which  they  are  to  be  applied  is  to  string  wires  thereon, 
and  thus  to  transmit  messages  for  all  the  public  at  a 
reasonable  compensation.  It  may  be  at  once  admitted 
that  the  purpose  is  a  public  one,  although  for  the  pri- 
vate gain  of  a  corporation;  but  the  constitution  pro- 
vides that  private  property  shall  not  be  taken  for  public 
use  without  compensation  to  the  owner.  It  is 

not  a  mere  difference  in  the  kind  of  vehicle,  or  in 
their  number  or  capacity,   or   in  the  manner,   method, 


§  303  PUBLIC    UTILITIES.  358 

or  means  of  locomotion.  All  these  might  be  varied, 
increased  as  to  number,  capacity,  or  form,  altered  as 
to  means  or  rapidity  of  locomotion,  or  transformed  in 
their  nature  and  character,  and  still  the  use  of  the 
highway  might  be  substantially  the  same — a  highway 
for  passage  and  motion  of  some  sort.  Here,  however, 
in  the  use  of  the  highway  by  the  defendant  is  the  fact 
of  permanent  and  exclusive  appropriation  and  posses- 
sion, a  fact  which  is,  as  it  seems  to  us,  wholly  at  war 
with  that  of  the  legitimate  public  easement  in  a  high- 
way. ...  It  has  the  power  to  take  the  land  upon 
making  compensation,  and  hence  the  refusal  of  an 
owner  will  not  stop  the  proposed  undertaking." 

§  303.  Street  railway  system  held  additional  servi- 
tude in  New  York. — This  same  court,  in  the  recent 
case  of  Rasch  v,  Nassau  Electric  R.  Co.,  198  N.  Y. 
385,  91  N.  E.  785,  decided  in  1910,  held  that  the  equip- 
ment necessary  to  the  operation  of  a  street  railway  is 
not  included  in  the  use  to  which  the  street  was  dedi- 
cated and  therefore  constituted  an  additional  servitude 
for  which  the  abutting  property  owner  is  entitled  to  be 
compensated.  Although  this  decision  follows  the  ear- 
lier authorities  of  this  jurisdiction,  they  stand  practi- 
cally alone,  for  it  has  been  generally  held  that  the 
street  railway  system  regardless  of  its  motive  power 
does  not  constitute  an  additional  servitude  in  the  street 
because  it  serves  a  purpose  peculiar  to  the  use  of 
the  street  for  which  it  was  dedicated  and  as  a  result 
of  the  improved  methods  it  aids  very  materially  in 
facilitating  actual  transportation.  That  the  case  truly 
represents  the  New  York  jurisdiction,  however,  ap- 
pears from  the  following  extract:  "But  the  rights  of 
the  plaintiff  in  this  case  rest  on  a  different  foundation. 
She  is  the  owner  of  the  fee  subject  to  the  public  ease- 
ment.    It  was  held  by  this  court  over  forty  years  ago 


359  ADDITIONAL   SERVITUDES.  §  304 

in  Craig  v.  Rochester  City  &  B.  Railroad  Company,  39 
N,  Y.  404,  and  reiterated  seven  years  ago  in  Peck  v. 
Schenectady  Railway  Company,  170  N.  Y.  298,  63  N. 
E.  357,  that  a  street  railroad  is  not  a  street  use,  but 
an  additional  burden  placed  on  the  land  for  which  the 
owner  of  the  fee  is  entitled  to  compensation.  ,  .  . 
For  the  first  time  the  question  was  squarely  presented 
to  this  court  in  South  Buffalo  Railway  Company  v. 
Kirkover,  176  N.  Y.  301,  68  N.  E.  366,  and  it  was  held: 
'Where  land  is  acquired  by  a  railroad  company  with- 
out the  consent  of  the  owner,  he  is  entitled  to  recover 
the  market  value  of  the  premises  actually  taken,  and 
also  any  damages  resulting  to  the  residue,  including 
those  which  will  be  sustained  by  reason  of  the  use  to 
which  the  portion  taken  is  to  be  put  by  the  company.'  " 

§  304.  Underground  rapid  transit  system  addi- 
tional.— In  the  case  of  In  re  Board  of  Rapid  Transit  R. 
Comrs.,  197  N.  Y.  81,  90  N.  E.  456,  36  L.  R.  A.  (N.  S.) 
647,  18  Ann.  Cas.  366,  decided  in  1909,  the  Supreme 
Court  of  New  York  held  that  the  construction  of  a 
subway  beneath  the  streets  of  New  York  City  and 
the  operation  of  an  electric  street  railway  system 
therein  constituted  an  additional  servitude,  for  as  the 
court  said :  "The  subway  occupies  a  part  of  the  street 
which,  although  beneath  the  surface,  might,  by  proper 
construction  and  change  of  grade,  be  used  for  ordinary 
highway  purposes,  and  traveled  upon  freely,  without 
license  or  recompense,  by  persons  using  their  own 
vehicles  or  their  own  methods  of  transportation.  The 
occupation  by  the  subway  and  its  trains  of  cars  is 
exclusive,  for  no  one  may  enter  either  without  pay- 
ment of  fare.  Highways  are  free  and  open  to  all  the 
people ;  the  subway  is  not.  Highways  are  for  the 
exclusive  use  of  none ;  the  subway  is  for  the  exclusive 
use  of  one.     Highways  are  for  travel  by  means  under 


§  305  PUBLIC    UTILITIES.  360 

the  exclusive  control  of  the  traveler;  the  subway  is 
for  travel  by  means  under  the  exclusive  control  of  its 
owner  or  operator.  .  ,  .  When,  however,  the  con- 
struction is  not  for  a  street  use,  even  if  it  is  for  a 
public  use,  liability  to  the  owner  of  the  fee  attaches 
to  a  city  the  same  as  to  a  railroad  corporation.  From 
the  Craig  Case  in  1868,  to  the  Peck  Case  in  1902,  with 
the  long  line  of  cases  intervening,  the  position  of  this 
court  has  been  uniform  and  consistent  in  maintaining 
that  surface  structures  and  superstructures  are  an 
additional  burden  on  the  fee  of  the  street.  Craig  v. 
Rochester  City  &  Brighton  R.  R.  Co.,  39  N.  Y.  404; 
Peck  v.  Schenectady  R.  Co.,  170  N.  Y.  298,  63  N.  E. 
357.  It  follows  as  a  logical  sequence  that  a  substruc- 
ture, with  the  physical  characteristics  and  conse- 
quences of  that  under  consideration,  must  be  governed 
by  the  same  principle,  so  that  a  railroad  constructed 
beneath  the  surface  of  a  street  is  a  new  burden,  not 
contemplated  by  the  original  owner  of  the  land  when 
it  was  devoted  to  use  as  a  street." 

§  305.  Telegraph  and  telephone  compared. — While 
a  number  of  cases  decide  and  many  more  contain 
dicta  to  the  effect  that  the  telegraph  constitutes  an 
additional  servitude  because  it  does  not  furnish  local 
service  and  is  not  adapted  to  the  personal  use  of  the 
abutting  property  owner  as  is  the  telephone,  the  deci- 
sion in  the  case  of  People  v.  Eaton,  100  Mich.  208, 
59  N.  W.  145,  24  L.  R.  A.  721,  decided  in  1894,  classi- 
fies the  telegraph  with  the  telephone  in  holding  that 
the  necessary  equipment  of  neither  constitutes  an  addi- 
tional servitude.  The  progressive  tendency  of  this 
decision  is  indicated  in  the  following  language:  "These 
telegraph  construction  acts  have  been  in  force  in  this 
state  for  many  years,  and  this  is  the  first  time  in  the 
history  of  the  state,  so  far  as  I  have  discovered,  where 


361  ADDITIONAL    SERVITUDES.  §  306 

it  has  been  claimed  that  the  placing  of  such  poles  in 
the  highway  is  an  additional  servitude.  We  are  aware 
that  in  some  states  the  doctrine  is  laid  down  that  the 
placing  of  such  poles  creates  additional  servitude  upon 
the  fee,  but  there  are  many  cases  holding  the  other 
way.  Pierce  v.  Drew,  136  Mass.  75,  49  Am.  R.  7,  and 
Julia  Bldg.  Asso.  v.  Bell  Telph.  Co.,  88  Mo.  258,  57 
Am.  R.  398,  hold  that  additional  servitude  is  not  cre- 
ated, and,  we  think,  upon  better  reasoning.  .  .  . 
It  would  be  a  great  calamity  to  the  state  if,  in  the 
development  of  the  means  of  rapid  travel,  and  the 
transmission  of  intelligence  by  telegraph  or  telephone 
communication,  parties  engaged  in  such  enterprises 
were  compelled  to  take  condemnation  proceedings 
before  a  single  track  could  be  laid,  or  a  pole  set." 

§  306.  Telephone  new  method  of  subjecting  streets 
to  old  use. — In  holding  that  where  land  is  dedicated 
for  street  purposes  this  includes  any  use  devoted  to 
the  service  of  the  public  whether  beneath  or  above 
as  well  as  upon  the  surface  of  the  street  including 
communication  by  telephone,  which  is  but  a  new  and 
improved  method  of  affecting  this  purpose  and  not  a 
new  burden  or  servitude  upon  the  fee  of  the  abutting 
owner,  the  court  in  the  case  of  Frazier  v.  East 
Tennessee  Tel.  Co.,  115  Tenn.  416,  90  S.  W.  620,  3  L. 
R.  A.  (N.  S.)  323,  112  Am.  St.  856,  decided  in  1906, 
supports  its  decision  by  the  following  argument:  "On 
the  other  side,  it  is  said  that  in  the  widest,  and,  like- 
wise, the  most  correct,  sense,  a  street  is  a  means  of 
intercommunication  between  the  people  of  a  city,  for 
traffic,  and  for  the  conduct  of  personal  and  social  inter- 
course, and  also  for  the  convenient  use  of  dwellings 
and  business  houses  abutting  thereon;  that  its  pri- 
mary purpose  is  for  passage,  it  is  true,  but  that  such 
passage  need  not  be,  alone,  that  of  people,  animals,  or 


§  307  PUBLIC    UTILITIES.  362 

wheeled  conveyances,  or  of  things  that  run  upon  the 
ground;  that  a  message  sent  through  the  air  upon 
electric  wires,  over  the  street,  takes  the  place  of  one 
sent  by  man  or  boy  walking,  or  upon  horseback,  or 
conveyed  by  a  vehicle,  along  the  street;  that  not  only 
is  the  same  service  performed  by  the  telephone,  but  in 
a  manner  far  better,  and  more  quickly;  that,  if  the 
thousands  of  messages  which  go  over  such  wires  in  a 
single  day  had  to  be  conveyed  by  men  or  vehicles, 
or  both,  the  streets  would  be  far  more  thronged  than 
they  now  are,  and  hence  rendered  less  comfortable, 
and  less  safe  for  use,  and  that  in  the  course  of  a  few 
months,  or  a  year's  time,  the  difference  in  the  wear  and 
tear  of  the  streets  would  be  very  perceptible,  because 
of  such  increased  use;  that  the  telephone  is  therefore 
but  an  improved  method  of  subjecting  the  streets  of 
a  city  to  an  old  use,  and  that  the  poles  and  wires  are 
just  as  necessary  adjuncts  to  this  new  method  as  are 
the  poles  and  wires  of  a  street  railway  or  an  electric 
light  plant,  erected  in  substantially  the  same  manner, 
and  no  more  obstructive." 

§  307.  Use  for  public  and  private  service  distin- 
guished.— The  difference  in  the  service  rendered 
whether  public  or  private  which  is  the  point  of  dis- 
tinction in  some  of  the  decisions  which  hold  that  the 
equipment  of  the  municipal  public  utility  providing 
private  rather  than  public  service  constitutes  an  addi- 
tional servitude  because  of  that  fact  is'  illustrated  by 
the  Supreme  Court  of  New  Jersey  in  the  case  of  Tay- 
lor V.  Public  Service  Corporation,  75  N.  J.  Eq.  371,  73 
Atl.  118,  decided  in  1909,  where  the  court  says:  "If, 
therefore,  the  defendants,  by  virtue  of  their  contract 
and  the  proceedings  of  the  municipality,  had  a  right, 
as  against  the  municipality,  to  erect  these  poles  for 
the  purposes  of  public  lighting,  the  complainant,  or  any 


363  ADDITIONAL   SERVITUDES.  §  308 

landowner  similarly  situated,  could  not  prevent  the 
placing  of  the  poles,  or  their  being  used,  for  the  pur- 
poses of  public  lighting.  But  if  the  company  was  in 
this  position,  and  used  the  poles  for  stringing  wires 
for  private  lighting,  the  landowner,  with  respect  to 
whose  land  no  consent  in  writing  had  been  given,  had 
the  right,  by  ejectment  or  by  resort  to  equity,  to  re- 
strain such  misuse.  French  v.  Robb,  67  N.  J.  L.  260, 
51  Atl.  509,  57  L.  R.  A.  956,  91  Am.  St.  R.  433;  An- 
dreas V.  Gas  &  Electric  Co.  of  Bergen  County,  61  N.  J. 
Eq.  69,  47  Atl.  555." 

§  308.  Nature  of  use  generally  not  distinguished. — 
This  distinction,  however,  does  not  generally  obtain 
and  seems  not  to  be  in  harmony  with  the  present 
tendency  of  the  later  decisions.  It  is  repudiated  ex- 
pressly by  the  Supreme  Court  of  Alabama  in  the 
recent  case  of  Hobbs  v.  Long  Distance  Tel.  &  T.  Co., 
147  Ala.  393,  41  So.  1003,  7  L.  R.  A.  (N.  S.)  87,  de- 
cided in  1906,  where  the  court  also  refuses  to  distin- 
guish between  urban  and  rural  highways  in  the  follow- 
ing vigorous  language  along  these  very  progressive 
lines:  "So,  on  the  subject  of  erection  of  poles  for 
electric  lighting,  on  streets,  after  some  contrary  de- 
cisions, the  evident  necessity  is  so  great  that  it  has 
come  to  be  generally  understood  that  it  is  not  an 
additional  burden,  though  there  still  remains,  in  the 
decisions  and  text  writers,  the  impression  that  it  is 
saved  by  the  fact  that  the  light  companies  generally 
light  the  streets  as  well  as  private  dwellings.  .  .  . 
Our  conclusion  is  that  the  public  roads,  when  dedi- 
cated, were  dedicated,  not  merely  for  travel  on  foot,  or 
on  animals,  or  in  vehicles,  but  for  locomotion  by  any 
means  that  should  be  afterwards  discovered,  and  for 
communication  between  the  citizens  of  the  country, 
by  carriers,  on  foot,  or  riding,  or  by  any  other  means 


§  309  PUBLIC    UTILITIES.  364 

that  might  be  found  suitable  and  best.  The  mails 
could  be  sent  over  them  in  any  way  that  was  found 
most  expeditious.  If  it  had  been  found  advisable  to 
send  the  mails  in  metal  boxes  swung  on  wires  far 
above  the  heads  of  the  people,  in  place  of  in  stages 
and  by  carriers,  no  one  would  have  supposed  it  was 
an  additional  burden  upon  the  abutting  owner.  So, 
if  it  is  found  better  to  string  wires  high  above  the 
roads  and  convey  messages  by  that  mysterious  some- 
thing which  is  in  the  atmosphere  and  which  seems 
to  be  as  exhaustless  as  the  bounties  of  Providence,  it 
is  accompHshing  one  of  the  great  purposes  for  which 
public  roads  are  dedicated.  Some  of  the  cases  have 
drawn  a  distinction  between  urban  and  suburban  roads, 
but  in  regard  to  wires  and  posts  there  would  be  more 
reason  for  declaring  them  burdensome  in  a  city 
(where  they  accumulate  in  such  numbers  as  to  inter- 
fere with  the  operation  of  engines  in  extinguishing 
fire)  than  in  the  county  where  there  are  but  few  and 
far  away  from  houses.  .  .  .  The  qualification 
which  we  make  is  that,  if  the  abutting  owner  shows 
that  there  will  be  actual  and  substantial  injury  to  his 
property,  he  is  entitled  to  compensation." 

§  309.  Street  and  rural  highway  not  distinguished 
for  telephone. — A  number  of  recent  cases  also  refuse 
to  make  the  distinction,  which  was  at  one  time  made 
by  several  jurisdictions,  between  the  nature  and  ex- 
tent of  the  easement  of  the  use  of  municipal  and  rural 
highways.  A  further  characteristic  opinion  to  this 
effect  is  furnished  in  the  case  of  Lowther  v.  Bridge- 
man,  57  W.  Va.  306,  50  S.  E.  410,  decided  in  1905, 
where  the  court  in  refusing  to  find  that  an  additional 
servitude  is  created  in  the  erection  of  the  necessary 
equipment  for  the  operation  of  a  telephone  system 
along  the  country  highway  says:     "The  cases  which 


365  ADDITIONAL   SERVITUDES.  §  309 

hold  that  there  is  no  new  or  additional  servitude  fur- 
ther hold  that  the  use  of  the  public  highv^ay  for  tele- 
graph or  telephone  lines  must  be  reasonable.  Our 
case  of  Maxwell  v.  Telegraph  Co.,  51  W.  Va.  121, 
41  S.  E.  125,  is  in  line  with  the  cases  holding  that 
there  is  no  additional  servitude  by  the  placing  of  tele- 
phone poles  and  wires  for  a  telephone  for  public  use 
along  the  public  highway.  Judge  Dent,  in  delivering 
the  opinion  of  the  court,  says:  'Telephone  poles  are 
not  things  of  beauty,  yet  their  utility  is  so  great  that 
their  ugliness  must  be  endured  until  human  invention 
has  discovered  some  more  tasteful  substitute  for  them. 
The  public  can  well  afford  to  surrender  a  reasonable 
portion  of  the  public  easement  in  its  highways  to  a 
public  utility  of  such  vastly  increasing  importance. 
As  the  owner  of  the  fee  in  such  highway  loses  nothing 
thereby,  he  has  no  grounds  of  complaint.  It  puts  no 
additional  burden  on  the  fee,  but  it  is  a  burden  alone 
upon  the  permanent  easement  to  which  it  is  appurte- 
nant and  subservient.'  This  case  is  binding  authority 
on  this  court,  and  necessarily  brings  us  to  the  con- 
clusion that  there  is  no  additional  servitude  by  the 
reasonable  use  of  a  public  highway  for  the  purpose 
of  placing  telephone  poles  and  wires  for  public  use 
along  it.  We  are  aware  that  some  authorities  make 
a  distinction  here  between  a  street  of  a  town  or  city, 
and  a  county  road  in  the  country,  but  we  see  no  sound 
reason  for  the  distinction." 

A  well  expressed  recent  decision  to  the  same  eflfect 
is  that  of  Cumberland  Tel.  &  T.  Co.  v.  Avritt,  120  Ky. 
34.  85  S.  W.  204,  decided  in  1905,  where  the  court  says: 
"There  is  no  sound  distinction  between  urban  and 
rural  highways  as  to  the  purposes  for  which  they  may 
be  used.  Public  highways  are  designed  as  avenues  of 
communication,  and  a  telephone  line  along  a  country 
road  is  no  more  an  additional  servitude  than  a  telephone 


§  3IO  PUBLIC    UTILITIES.  366 

line  along  a  railroad  right  of  way.  No  use  of  the  high- 
way can  be  made  which  practically  subverts  its  use  by 
the  public  in  the  ordinary  way,  nor  may  it  be  used  for 
any  purpose  not  public.  The  wires  of  a  telephone 
company  are  no  less  immovable,  than  the  rails  of  the 
railroad,  and  they  are  no  more  a  burden  to  the  ad- 
joining property  than  the  rails.  The  great  weight  of 
authority  is  to  the  effect  that  a  telephone  line  on  a 
public  highway  is  not  an  additional  servitude  in  those 
states  maintaining  the  Kentucky  rule  that  a  railway 
is  not  an  additional  servitude." 

§  310.  Tendency  of  decisions  progressive  and  prac- 
ticable.— A  further  case  to  this  effect  which  is  fre- 
quently cited  as  authority  and  generally  recognized 
as  a  leading  one  is  that  of  Cater  v.  Northwestern  Tel. 
Exch.  Co.,  60  Minn.  539,  63  N.  W.  iii,  28  L.  R.  A. 
310,  51  Am.  St.  R.  543,  decided  in  1895,  where  the 
court  in  holding  that  any  use  of  the  highway  whether 
for  travel  or  communication  of  intelligence  by  the 
methods  known  at  the  time  of  the  dedication  or  by 
new  ones  are  all  included  within  the  purposes  of  the 
dedication  and  impose  no  additional  servitude  pro- 
vided, of  course,  that  they  do  not  unreasonably  im- 
pair the  special  easements  of  access,  light  and  air  be- 
longing to  the  abutting  property  owners,  for  as  the 
court  says:  "It  seems  to  us  that  a  limitation  of  the 
public  easement  in  highways  to  travel  and  the  trans- 
portation of  persons  and  property  in  movable  vehicles 
is  too  narrow.  In  our  judgment  public  highways, 
whether  urban  or  rural,  are  designed  as  avenues  of 
communication;  and,  if  the  original  conception  of  a 
highway  was  limited  to  travel  and  transportation  of 
property  in  movable  vehicles,  it  was  because  these 
were  the  only  modes  of  communication  then  known; 
that  as   civilization   advanced,   and  new   and   improved 


367  ADDITIONAL   SERVITUDES.  §3^0 

methods  of  communication  and  transportation  were 
developed,  these  are  all  in  aid  of  and  within  the  gen- 
eral purpose  for  which  highways  are  designed." 

The  decision  in  the  case  of  Hershfield  v.  Rocky- 
Mountain  Bell  Tel.  Co.,  12  Mont.  102,  29  Pac.  883,  de- 
cided in  1892,  furnishes  a  further  excellent  statement 
of  this  principle,  together  with  the  practical  reason 
upon  which  it  is  based  in  the  following  language: 
"In  this  view  (and  it  seems  to  be  very  practical),  the 
telephone  pole  would  in  fact  facilitate  passage  upon 
the  street,  for  it  would  constantly  keep  out  of  it  a 
hundred  or  perhaps  a  thousand-fold  more  of  incum- 
brance than  it  brings  in,  by  enabling  persons  to  com- 
municate without  physically  passing  through  the 
streets  to  meet  one  another.  We  think  that  to  use 
the  street  in  a  reasonable  manner,  and  to  a  reasonable 
extent,  for  this  purpose,  is  just  and  proper,  and  is 
within  the  uses  to  which  the  street  may  lawfully  be 
put,  when  such  use  is  sanctioned  by  the  public 
through  its  duly  authorized  municipal  agents." 

The  Supreme  Court  of  Kansas  in  the  case  of  Mc- 
Cann  v.  Johnson  County  Tel,  Co.,  69  Kans.  212,  76 
Pac.  870,  decided  in  1904,  shows  itself  to  be  abreast 
of  the  times  in  permitting  the  use  of  the  streets  to 
facilitate  travel  or  the  communication  of  intelligence 
by  any  modern  method  of  travel  and  communication 
which  may  be  invented,  for  as  the  court  says:  "The 
purpose  of  the  highway  is  the  controlling  factor.  It  is 
variously  defined  or  held  to  be  for  passage,  travel, 
traffic,  transportation,  transmission,  and  communica- 
tion. It  is  a  thoroughfare  by  which  people  in  different 
places  may  reach  and  communicate  with  each  other. 
The  use  is  not  to  be  measured  by  the  means  employed 
by  our  ancestors,  nor  by  the  conditions  which  existed 
when  highways  were  first  devised.  The  design  of  a 
highway   is   broad   and   elastic   enough   to   include   the 


§311  PUBLIC    UTILITIES.  368 

newest  and  best  facilities  of  travel  and  communication 
which  the  genius  of  man  can  invent  and  supply.  .  .  . 
The  messages  transmitted  over  the  line  are  a  sub- 
stitute for  the  messengers  who  formerly  passed  over 
the  highway,  and  thus  to  a  great  extent  relieve  it  from 
the  burdens  and  wear  of  travel.  No  modern  invention 
has  contributed  more  to  commercial  and  social  inter- 
course than  the  telephone." 

§311.  Modern  inventions  for  or  in  lieu  of  travel 
included  in  public  purposes. — A  recent  decision  by  the 
Supreme  Court  of  South  Dakota  in  the  case  of  Kirby 
V.  Citizens'  Tel.  Co.,  17  S.  Dak.  362,  97  N.  W.  3,  de- 
cided in  1903,  gives  effect  to  this  comprehensive  defi- 
nition of  the  uses  to  which  the  streets  are  dedicated  so 
as  to  include  the  more  modern  methods  and  later  in- 
ventions, all  of  which  tend  to  faciHtate  travel  and  com- 
munication, for  as  the  court  says:  "The  streets  of  a 
city  are  now  used  for  many  purposes  unknown  in  for- 
mer times.  A  century  ago  or  less  there  was  practi- 
cally no  use  of  the  streets  for  sewers,  laying  of  water 
and  gas  pipes  and  operating  street  railways,  but  with 
the  advance  of  civilization  and  the  improved  condi- 
tions of  society  these  uses  have  become  a  necessity, 
and  recognized  by  the  courts,  and  quite  generally  held 
as  not  adding  any  new  servitude  to  the  abutting  fee 
owner  for  which  he  is  entitled  to  compensation.  The 
telephone  is  but  a  step  in  advance  of  former  methods 
of  conveying  intelligence  and  information,  and  is  a 
substitute  for  the  messenger  and  carrier  of  former 
times." 

§  312.  Conservative  decisions  find  additional  servi- 
tudes.— The  following  cases  are  given  to  illustrate  the 
attitude  of  those  courts  which  hold  that  an  additional 
servitude  or  burden  is  created  in  the  construction  of 


369  ADDITIONAL   SERVITUDES.  §311 

such  wires  and  poles  along  streets  and  public  high- 
ways as  are  necessary  to  provide  electric  light  and 
communication  by  wire  and  at  the  same  time  to  point 
out  that  even  the  jurisdictions  so  holding  are  now  of 
the  opinion  that  there  is  no  reason  for  distinguishing 
between  the  urban  and  rural  highway  nor  between 
those  cases  where  the  fee  is  in  the  abutting  property 
owner  or  the  public.  These  cases  therefore  are  con- 
sistent with  the  current  authorities  generally  except 
as  to  there  being  an  additional  servitude  created  and 
this  point  of  distinction  is  due  to  the  difference  in  the 
definition  of  the  uses  for  which  the  streets  and  high- 
ways are  dedicated.  The  following  cases  holding  that 
such  uses  are  limited  to  actual  travel  are  consistent  in 
deciding  that  the  erection  of  poles  and  the  stringing 
of  wires  constitute  an  additional  servitude  because  this 
does  not  provide  a  method  of  travel,  but  to  a  degree 
interferes  with  the  exercise  of  that  right  in  so  far  as 
they  may  constitute  an  obstruction  to  any  particular 
method  of  travel  or  transportation  that  may  be  em- 
ployed, and  is  accordingly  inconsistent  with  the  use 
for  public  travel  for  which  the  particular  highway  is 
dedicated  and  is  therefore  an  additional  burden  or 
servitude  not  included  within  the  purposes  of  the  dedi- 
cation. This  is  the  conservative  theory,  and  is,  of 
course,  contrary  to  the  position  taken  by  the  more 
progressive  and  increasing  number  of  jurisdictions  in 
holding  that  the  highways  are  dedicated  for  the  use 
of  the  public  in  communication  as  well  as  for  actual 
travel  and  transportation,  and  that  any  method  by 
which  the  public  may  substitute  communication  for 
transportation  and  thereby  avoid  the  necessity  of  ac- 
tual travel  is  a  legitimate  use  of  the  highway  and  does 
not  constitute  an  additional  servitude  on  it  because  in 
effect  it  necessarily  reduces  travel  and  facilitates  com- 
munication. 
24— Pub.  ut. 


§  313  PUBLIC    UTILITIES.  370 

u. 

This    conservative   position   is   well    stated   by   the 

Supreme  Court  of  North  Dakota  in  the  case  of  Don-, 
ovan  V.  Allert,  ii  N.  Dak.  289,  91  N.  W.  441,  58  L. 
R.  A.  775,  decided  in  1902,  w^here  the  court  says:  "The 
primary  use  of  a  street  or  highway  is  confined  to 
travel  or  transportation.  Whatever  the  means  used, 
the  object  to  be  attained  is  passage  over  the  territory 
embraced  within  the  limits  of  the  street.  Whether  as 
a  pedestrian,  or  on  a  bicycle,  or  in  a  vehicle  drawn  by 
horses  or  other  animals,  or  in  a  vehicle  propelled  by 
electricity,  or  in  a  car  drawn  by  horses  or  moved  by 
electricity,  the  object  to  be  gained  is  moving  from 
place  to  place.  The  same  idea  is  expressed  by  courts 
and  text  writers,  that  'motion  is  the  primary  idea  of 
the  use  of  the  street.'  ,  .  .  Neither  the  city  council 
nor  the  legislature  could  deprive  the  plaintiff  of  com- 
pensation for  his  property  rights  in  such  lot,  if  the 
telephone  poles  set  thereon  are  not  a  use  of  the  street, 
within  the  purposes  for  which  the  easement  was  orig- 
inally conveyed  to  the  public." 

§  313.  Original  dedication  made  the  test. — This 
same  court  in  the  case  of  CosgrifT  v.  Tri-State  Tel.  & 
T.  Co.,  15  N.  D.  210,  107  N.  W.  525,  5  L.  R.  A.  (N. 
S.)  1 142,  decided  in  1906,  extends  its  decision  in  the 
Donovan  case  by  holding  that  the  erection  of  poles 
and  wires  for  a  telephone  system  in  a  country  high- 
way constitutes  an  additional  servitude  as  well  as  in 
the  streets  of  the  municipality,  although,  as  before 
suggested,  the  case  refuses  to  make  any  distinction 
on  this  point  between  the  street  and  rural  highway 
as  follows :  "The  rights  of  a  landowner  whose  land 
abuts  upon  a  rural  highway  are  not  inferior  to  those 
of  one  whose  land  abuts  upon  the  streets  of  a  city. 
This  is  conceded.  Indeed,  it  has  been  often  held  that 
the   rights   of   the    owner   of   land   abutting   upon   the 


T^yi  ADDITIONAL   SERVITUDES.  §  313 

Streets  of  a  city  are  more  restricted.  This  distinction, 
which  is  sometimes  made,  rests  upon  an  alleged  dif- 
ference in  the  purpose  of  the  original  dedication.  Eels 
V.  American  Telephone  &  Telegraph  Co.,  143  N.  Y. 
133,  25  L.  R.  A.  640,  38  N.  E.  202;  Croswell,  Elec- 
tricity, §§  117,  126.  The  underlying  principle  which 
must  govern  is  the  same,  however,  in  either  case.  The 
proposed  use  must  be  within  the  purpose  of  the  orig- 
inal dedication.  If  it  is  not,  it  constitutes  an  addi- 
tional servitude,  whether  it  be  of  a  street  or  rural 
highway.  .  .  .  Some  courts  have  held  that  the 
primary  and  original  purpose  of  the  dedication  of  a 
street  or  highway  includes  the  transmission  of  intel- 
ligence as  well  as  public  travel.  These  cases  have 
the  merit  of  being  logical  in  their  conclusion,  for, 
adopting  the  view,  which  in  our  opinion  is  erroneous, 
that  a  street  or  highway  is  dedicated  for  use,  both  for 
travel  and  the  transmission  of  intelligence,  it  follows 
necessarily  that  the  maintenance  of  a  telephone  is  not 
a  new  use,  and  this  would  also  be  true  of  any  and  all 
new  modes  of  communication  which  ingenuity  may 
devise." 

A  decision  to  this  same  effect  is  furnished  by  the 
Supreme  Court  of  California  in  the  recent  case  of 
Gurnsey  v.  Northern  California  Power  Co.,  160  Cal. 
699.  117  Pac.  906,  36  L.  R.  A.  (N.  S.)  185,  decided  in 
191 1,  which  is  based  on  the  theory  that  the  use  of 
such  a  highway  for  the  transmission  of  electric  light 
for  private  purposes  is  "for  a  purpose  not  incidental 
to  the  use  of  such  highway  [and]  is  inconsistent  with 
the  dedication  of  the  highway  and  the  use  of  the  pub- 
lic. It  constituted  an  additional  servitude  upon  the 
land  of  the  plaintiff  beyond  the  purpose  of  the  dedica- 
tion, and  was  an  invasion  of  his  property  rights  there- 
in, for  which  he  was  entitled  to  redress."  Because  the 
abutting   property   owner   had   permitted    the    erection 


§314  PUBLIC    UTILITIES.  372- 

of  the  poles  and  wires,  however,  he  was  restricted  in 
his  recovery  to  the  damages  which  he  sustained  and 
was  not  permitted  to  require  their  removal.  This 
as  the  court  said  "is  based  mainly  on  the  great  prin- 
ciple of  public  policy,  under  which  the  rights  of  the 
citizen  are  sometimes  abridged  in  the  interest  of  the 
public  welfare." 

§  314.     Ownership  of  fee  in  street  not  considered. 

— Decisions  to  the  same  effect  by  the  Supreme  Court 
of  Ohio  are  furnished  in  the  companion  cases  of  Cal- 
len  V.  Columbus  Edison  Electric  Light  Co.,  66  Ohio 
St.  1 66,  64  N.  E.  141,  58  L.  R.  A.  782,  and  Schaaf  v. 
Cleveland,  M.  &  S.  R.  Co.,  66  Ohio  St.  215,  64  N.  E. 
145,  both  of  which  were  decided  April  22,  1902.  While 
the  Callen  case  held  that  the  construction  in  the 
streets  of  the  necessary  poles  and  wires  for  furnishing 
electric  lighting  for  private  use  constitutes  an  addi- 
tional servitude,  the  case  refuses  to  make  any  distinc- 
tion between  the  rural  highway  and  the  street  which 
to  this  extent  is  in  harmony  with  the  prevailing  rule. 
In  the  course  of  its  decision  the  court  says:  "It  would 
seem  to  follow  from  the  foregoing  that,  for  practical 
purposes,  there  is  no  substantial  difference  in  the  right 
of  the  owner  of  lands  abutting  upon  a  country  high- 
way in  such  highway,  and  that  of  the  owner  of  a  lot 
abutting  on  a  city  street  in  such  street.  In  the  one 
case,  where  the  fee  is  in  the  landowner,  his  rights  in 
and  over  the  streets  are  in  their  nature  legal,  while,  if 
the  fee  be  in  the  public,  the  lawful  rights  of  the  abut- 
ting owners  are  in  their  nature  equitable  easements. 
In  both  situations  the  right  of  the  public  is  for  road 
or  street  purposes,  and  is  necessarily  limited  to  such 
control  as  is  necessary  to  accomplish  those  purposes. 
.  .  .  The  electric  lighting  by  defendant  is  not  of 
the  streets  and  for  the  city.     It  is  wholly  for  private 


T^yi  ADDITIONAL    SERVITUDES.  §315 

use.  Hence,  it  is  a  private  purpose,  and  is  not  a  street 
purpose,  in  any  aspect  of  it.  Its  use  of  these  streets 
is  not  such  as  was  contemplated  by  the  original  dedi- 
cation. On  the  contrary,  the  maintenance  of  its  struc- 
tures devolves  new  burdens  upon  the  land — burdens 
calculated  to  materially  impair  the  rights  of  the  owner 
in  the  street." 

§  315.  Interurban  in  rural  highway  held  additional 
servitude. — This  same  court  in  the  Schaaf  case  de- 
cided that  the  interurban  railway  operating  at  the 
side  of  the  country  highway  immediately  adjacent  to 
the  fields  of  the  abutting  property  owner  constitutes 
an  additional  servitude  not  covered  by  the  dedication 
in  that  it  interferes  with  his  right  of  access  from  the 
highway  to  his  fields.  The  same  wires  and  poles  were 
used  for  the  additional  purpose  of  conveying  electricity 
for  light,  power  and  heat  to  private  consumers  for 
profit,  which  the  court  held  constituted  an  additional 
servitude  in  that  it  created  a  further  interference  with 
the  property  rights  of  the  abutting  owner.  The  deci- 
sion is  supported  by  the  following  argument  which  is 
characteristic  of  the  cases  holding  that  such  uses  con- 
stitute additional  servitudes:  'Tn  our  opinion,  the 
construction  and  operation  of  the  railroad,  as  author- 
ized and  proposed,  must  necessarily  constitute  a  .-seri- 
ous obstruction  to  the  plaintiffs'  use  of  the  public 
highway  as  a  means  of  access  to  their  farms,  and  an 
additional  burden  on  the  highway,  not  contemplated 
in  its  originally  intended  uses.  The  whole  burden 
of  the  railway,  with  all  of  its  authorized  appurte- 
nances, is  thrown  entirely  upon  the  side  of  the  public 
road  next  to  the  plaintiffs'  lands,  and  between  them 
and  the  traveled  part  of  the  roadway.  The  nature  of 
that  burden  is  not  different  in  any  material  respect 
from  that  imposed  by  the  construction  and  operation 


§315  PUBLIC    UTILITIES.  374 

of  a  Steam  railroad.  The  difference,  if  any,  is  merely 
in  the  degree  of  the  burden,  and  not  in  its  character, 
and  can  scarcely  be  less  in  any  degree.  .  .  .  And 
in  addition  to  this,  the  company  is  given  authority  to 
erect  and  maintain  on  the  same  side  of  the  public 
roadway,  and  next  to  the  plaintiffs'  lands,  all  poles, 
which  are  of  large  dimensions,  and  all  wires  and  other 
appliances,  necessary  to  enable  it  to  operate  an  elec- 
tric plant  for  supplying  light,  power,  and  heat  to  con- 
sumers, for  profit.  .  .  .  All  things  considered,  it  is 
reasonably  certain,  from  the  facts  found,  that  the  prac- 
tical operation  of  such  a  road,  within  its  capacity,  must 
necessarily  produce  annoyance  and  inconvenience  to 
the  plaintiffs,  and  interfere  with  their  property  rights 
as  abutting  owners,  of  the  same  general  character  that 
result  from  the  operation  of  steam  railroads,  and  be- 
come an  additional  burden  on  the  public  highway,  and 
taking  of  the  plaintiffs'  property,  in  the  same  sense. 
.  .  .  And  it  is  obvious,  also,  that  within  this  rule 
the  construction  and  operation  of  an  electric  plant, 
with  its  appliances,  in  connection  with  such  railway, 
and  on  the  same  side  of  the  traveled  public  roadway, 
for  supplying  heat,  power,  and  Hght  to  consumers  for 
profit,  constitutes  another  and  additional  burden,  which 
is  an  invasion  of  the   plaintiff's   property  rights." 


CHAPTER  XVII. 

EXEMPTION  FROM  TAXATION  OF  PROP- 
ERTY SUPPLYING  MUNICIPAL 
PUBLIC  UTILITIES. 


Section. 

316.  Municipal  ownership  facilitated  by  tax  exemption. 

317.  Power  to  tax  under  federal  constitution. 
31S.  Taxation  under  state  constitutions. 

319.  Municipal    property   used   for   governmental   and    private   pur- 

poses. 

320.  Public  governmental  property  not  taxed. 

321.  Municipal  public  utility  property  of  municipality. 

322.  Public  purpose  entitles  such  property  to  exemption. 

323.  Power  to  produce  revenue  not  the  proper  test. 

324.  Nature  of  purpose  not  changed  by  income  received. 

325.  "Municipal  purpose"  defined. 

326.  Present   use   must   be   public. 

327.  Water-works  a  public  purpose. 

328.  Purchased  by  taxation  and  under  eminent  domain. 

329.  Property  beyond  limits  of  municipality  may  be  taxed. 

330.  Such  property  only  taxable  by  statutory  provisions. 

331.  Property  exempt  for  ownership  and  purpose  public. 

332.  Payment  for  service  same  as  payment  of  taxes. 
833.  Kentucky  rule  as  to  municipal  property. 

334.  Distinction  between  public  and  governmental  property  invalid. 

335.  Municipal  water-works  under  Kentucky  rule. 

336.  Limitation  denying  right  to  sell  for  nonpayment  of  taxes. 

337.  Statute  taxing  property  producing  income  in  Pennsylvania. 

338.  Property  providing  private  service  taxed  In  Vermont. 

339.  Property  of  private  parties  taxable. 

340.  Contract   of  municipality  to   exempt  such   property   from   tax- 

ation. 

341.  Contract  treated  as  payment  for  public  service. 

342.  Consideration  of  such  contract  must  be  reasonable. 

343.  Contract  not  in  effect  an  exemption. 

344.  Strict  construction  denies  validity  of  agreement. 

345.  Practical  statement  of  the  rule. 


375 


§  3l6  PUBLIC    UTILITIES.  376 

§  316,  Municipal  ownership  facilitated  by  tax  ex- 
emption.— The  facility  with  which  a  municipal  corpo- 
ration may  increase  its  sphere  of  activity  by  assuming 
the  operation  of  its  own  pubHc  utilities  is  largely  af- 
fected by  the  attitude  of  the  government  towards  the 
property  devoted  to  these  purposes  as  expressed  in 
the  law  with  regard  to  its  taxation.  For  even  where 
taxes  are  imposed  with  the  single  idea  of  securing 
revenue,  which,  of  course,  is  usually  the  case,  a  mu- 
nicipality, whose  municipal  public  utility  plants  are 
not  subject  to  either  federal,  state,  or  local  taxation, 
can  perform  the  desired  service  much  more  easily  than 
it  could  were  such  property  subject  to  taxation.  The 
attitude  of  the  courts  with  regard  to  the  taxation  of 
such  municipal  property,  therefore,  has  an  important 
bearing  on  the   subject   under  consideration. 

§317.     Power  to  tax  under  federal  constitution. — 

This  subject  will  be  treated  from  the  point  of  view  of 
constitutional  power  and  from  that  of  judicial  con- 
struction of  existing  statutes.  Since  the  decision  of 
the  United  States  Supreme  Court  in  the  case  of  South 
Carolina  v.  United  States,  199  U.  S.  437,  50  L.  ed.  261, 
it  must  be  accepted  as  the  law  that  the  United  States 
government  has  the  power  to  tax  all  business  under- 
takings of  municipal  corporations.  In  this  case  it  was 
held  that  the  state  dispensaries  for  the  sale  of  liquor 
were  subject  to  the  tax  imposed  by  the  law  of  con- 
gress taxing  the  sale  of  liquor. 

§  318.     Taxation  under  state  constitutions. — There 

is  also  no  doubt  as  to  the  power  of  the  states  under 
the  ordinary  state  constitutions  to  tax  the  property 
of  municipal  corporations.  But  generally  such  consti- 
tutional provisions  do  not  require  the  taxation  of  even 
what  is  regarded  as  the  private  property  of  municipal 


377  EXEMPTION     FROM     TAXATION.  §319 

corporations.  The  court  of  Kentucky,  however,  until 
recently,  has  taken  the  other  view  of  the  constitution 
of  that  state. ^ 

§  319.  Municipal  property  used  for  governmental 
and  private  purposes. — When  we  consider  the  law  as 
laid  down  by  the  courts  in  the  absence  of  pertinent 
constitutional  provisions,  we  must  distinguish  between 
the  property  of  municipal  corporations  which  is  used 
for  a  distinctly  governmental  purpose  and  that  which 
is  used  in  connection  with  the  operation  by  such  cor- 
porations of  a  municipal  public  utility. 

§  320.  Public  governmental  property  not  taxed. — 
The  rule  of  law  is  universally  accepted  by  all  our 
courts  to  the  effect  that  public  property  and  the  instru- 
mentalities of  government,  whether  pertaining  to  the 
federal,  state,  or  municipal  government,  which  are 
held  for  public  or  governmental  purposes,  are  not,  in 
the  absence  of  a  statute  to  that  effect,  subject  to  tax- 
ation. Although  this  immunity  from  taxation  is  gen- 
erally confirmed  expressly  by  constitutional  provisions 
or  statutory  grants  it  is  based  on  one  of  the  most 
fundamental  principles  of  government  and  good  busi- 
ness usages  and,  in  the  absence  of  any  express  provi- 
sion, is  implied  by  our  courts  from  the  necessity  of 
preventing  the  functions  and  activities  of  government 
from  being  interfered  with  or  impeded.  This  principle 
is  strictly  adhered  to  for  the  further  practical  purpose 
of  avoiding  the  useless  and  inconsistent  formality  of 
permitting  the  government  to  tax  itself  to  pay  itself 
money  which  could  only  be  finally  secured  by  other 
taxation." 

1  Clark  V.  Lousiville  Water  Co.,  90  Ky.  515,  14  S.  W.  602,  143 
U.  S.  1,  36  L.  ed.  55;  Newport  v.  Commonwealth,  106  Ky.  434,  50 
S.  W.  845,  45  L.  R.  A.  518. 

2  People  ex.  rel.  v.  Assesors  of  Brooklyn,  111  N.  Y.  505,  19  N. 


§  321  PUBLIC    UTILITIES.  378 

It  is  evident  that  no  benefit  could  accrue  from  such 
a  proceeding  except  to  the  taxing  officers  whose  com- 
pensation would  simply  add  so  much  more  to  the  net 
amount  necessary  to  be  raised  for  the  support  of  the 
government.* 

§  321.  Municipal  public  utility  property  of  munici- 
pality.— While  the  authorities  are  uniform  in  exempt- 
ing from  taxation  by  implication  property  held  and 
used  by  the  municipality  for  public  and  governmental 
purposes,  all  the  courts  can  not  be  said  to  be  of  the 
opinion  that  property  of  municipal  corporations  which 
is  used  by  them  in  their  private  business  capacity  in 
furnishing  such  public  utilities  as  gas,  water,  and  elec- 
tric light  is  entitled  to  such  exemption.  In  fact,  as  has 
been  said,  the  court  of  one  jurisdiction  formerly  held 
a  statute  expressly  exempting  such  property  from  tax- 
ation to  be  unconstitutional.* 

§  322.  Public  purpose  entitles  such  property  to 
exemption. — It  is  submitted,  however,  that,  if  within 
the  meaning  of  the  constitution,  the  providing  of  these 
utilities  is  a  public  purpose  and  the  property  so  used 
is  devoted  to  a  public  trust,  for  the  acquisition  of 
which  money  may  be  raised  by  taxation  because  the 
purpose  is  a  public  or  municipal  one,  the  property  so 
acquired  and  used  should  be  entitled  to  exemption  from 
taxation  the  same  as  other  municipal  property. 

As   a   matter   of   reason   if   the   purpose   is   such   a 

E.  90;  Alpena  City  Water  Co.  v.  Alpena,  130  Mich.  518,  90  N.  W. 
323;  Altgelt  v.  San  Antonio,  81  Tex.  436,  17  S.  W.  75,  13  L.  R.  A. 
383;  Cartersville  Water-works  Co.  v.  Cartersville,  81  Ga.  689,  16  S.  E. 
70;  Portland  v.  Portland  Water  Co.,  67  Maine  135;  Rochester  v. 
Coe,  49  N.  Y.  S.  502. 

3  Cooley,  Taxation,  p.   263,   and   cases  cited. 

4  Clark  V.  Louisville  Water  Co.,  90  Ky.  515,  14  S.  W.  502,  143 
U.  S.  1,  36  L.  ed.  55. 


379  EXEMPTION  FROM  TAXATION.  §  323 

municipal  one,  that  these  plants  of  the  city  providing 
public  utilities  may  be  acquired  and  maintained  by 
taxation,  it  remains  public  or  municipal  from  the  point 
of  view  of  the  lav^  of  taxation,  and  as  a  practical  busi- 
ness principle  the  taxing  of  such  property  which  is 
acquired  and  maintained  wholly  at  the  public  expense 
by  taxation,  except  as  revenue  may  be  derived  from 
its  use  and  operation,  is  simply  taxing  the  property 
of  the  city  for  its  own  support  with  the  necessary  re- 
sult that  nothing  of  any  net  value  to  the  city  is  ac- 
quired to  offset  the  expense  of  such  taxation. 

K  §  323-  Power  to  produce  revenue  not  the  proper 
test. — Nor  should  the  fact  that  revenue  may  be  de- 
rived from  the  operation  of  such  plants  by  the  city 
change  the  principle  of  their  exemption  from  taxation, 
for  in  no  sense  can  that  fact  alter  the  nature  of  the 
use  to  which  such  property  is  put  nor  the  purpose  ac- 
complished by  such  use.  And  this  is  the  test  of  its 
being  a  proper  subject  of  support  by  taxation  and  of 
exemption  from  taxation.  That  revenue  may  be  real- 
ized from  such  plants,  tending  to  make  them  self- 
supporting,  is  no  reason  for  subjecting  them  to  the 
payment  by  taxation  for  their  own  support  and  that 
of  the  government  to  which  they  belong.  This  inci- 
dental matter  of  revenue  does  not  change  the  nature 
of  the  use  or  purpose  of  such  property  from  a  public 
one  and  for  municipal  purposes  generally,  to  one  that 
is  wholly  private  and  that  is  conducted  for  the  sole 
purpose  of  pecuniary  profit  rather  than  for  the  gen- 
eral welfare,  and  so  liable  to  taxation,  as  it  contended 
in  some  of  the  cases  to  which  reference  will  be  made." 

5  CONNECTICUT.— West  Hartford   v.   Board   of  Water  Comrs., 
44  Conn.  360. 

FEDERAL.— Bartholomew  v.  Austin,  S5  Fed.  359. 
FLORIDA.— Tampa  v.  Kaunltz,  39  Fla.  683,  23  So.  416. 


§  324  PUBLIC    UTILITIES.  380 

§  324.  Nature  o£  purpose  not  changed  by  income 
received. — That  pubhc  property  yielding  revenue  is 
not  a  proper  subject  for  taxation  on  that  account  is 
well  illustrated  in  the  case  of  People  ex  rel.  v.  Asses- 
sors of  Brooklyn,   iii   N.  Y.  505,  19  N.  E.  90,  where 

GEORGIA.— Tarver  v.  Dalton,  134  Ga.  462,  67  S.  E.  929,  29  L.  R.  A. 
(N.  S.)  183. 

ILLINOIS.— Shelbyville  Water  Co.  v.  People,  140  111.  545,  30  N. 
E.  678,  16  L.  R.  A.  505. 

KANSAS.— Sumner  Co.  v.  Wellington,  66  Kans.  590,  72  Pac.  216, 
60  L.  R.  A.  850. 

KENTUCKY.- Clark  v.  Louisville  Water  Co.,  90  Ky.  515,  14  S. 
W.  502,  143  U.  S.  1,  36  L.  ed.  55;  Commonwealth  v.  Paducah,  31 
Ky.  L.  528,  102  S.  W.  882;  Covington  v.  Commonwealth,  107  Ky. 
680,  39  S.  W.  836,  173  U.  S.  231,  43  L.  ed.  679;  Covington  v.  District 
of  Highlands,  113  Ky.  612,  24  Ky.  L.  433,  68  S.  W.  669,  110  S.  W. 
338;  Dayton  v.  Bellevue  Water  &  Fuel  Gaslight  Co.,  119  Ky.  714, 
24  Ky.  L.  194,  68  S.  W.  142;  Frankfort  v.  Commonwealth,  29  Ky.  L. 
699,  94  S.  W.  648;  Louisville  v.  Commonwealth,  62  Ky.  295,  1  Duv. 
295,  85  Am.  Dec.  624;  Louisville  v.  McAteer,  26  Ky.  L.  425,  81  S.  W. 
698,  1  L.  R.  A.  (N.  S.)  766;  Negley  v.  Henderson,  21  Ky.  L.  1394, 
22  Ky.  L.  912,  55  S.  W.  554,  59  S.  W.  19;  Ryan  v.  Louisville,  133 
Ky.  714,  118  S.  W.  992. 

MAINE.— Maine  Water  Co.  v.  Waterville,  93  Maine  586,  45  Atl. 
830, '49  L.  R.  A.  294. 

MASSACHUSETTS.— County  of  Essex  v.  Salem,  153  Mass.  141, 
26  N.  E.  431;  Miller  v.  Fitchburg,  180  Mass.  32,  61  N.  E.  277;  Somer- 
ville  V.  Waltham,  170  Mass.  160,  48  N.  E.  1092;  Wayland  v.  County 
Comrs.,  4  Gray  (Mass.)  500. 

MICHIGAN.— Ludington  Water-Supply  Co.  v.  Ludington,  119 
Mich.  480,  78  N.  W.  558. 

NEBRASKA.— Nebraska  Tel.  Co.  v.  Lincoln,  82  Nebr.  59,  117  N. 
W.  284,  28  L.  R.  A.  (N.  S.)  221. 

NEW  HAMPSHIRE.— Newport  v.  Unity,  68  N.  H.  587,  44  Atl.  704, 
73  Am.  St.  626. 

NEW  JERSEY.— State,  Water  Comrs.  of  Jersey  City  v.  Gaffney, 
34  N.  J.  L.  131. 

NEW  YORK. — People  ex  rel.  v.  Assessors  of  Brooklyn,  111  N. 
y.  505,  19  N.  E.  90;  People  ex  rel.  v.  Hess,  157  N.  Y.  42,  51  N.  E. 
410;   Rochester  v.  Rush,  80  N.  Y.  302. 

OHIO.— State  ex  rel  v.  Toledo,  48  Ohio  St.  112,  26  N.  E.  1061,  11 
L.  R.  A.  729;  Toledo  v.  Hosier,  54  Ohio  418,  43  N.  E.  583;  Toledo 
V.  Yeager,  8  Ohio  C.  C.  318. 

PENNSYLVANIA.— Chadwick  v.   Maginnes,   94  Pa.   St.   117. 


381  EXEMPTION  FROM  TAXATION.  §  325 

the  court  passed  upon  the  matter  of  the  right  of  the 
defendant  city  to  tax  property  within  its  Hmits  be- 
longing to  the  city  of  New  York  and  used  by  such 
city  for  a  landing  place  for  its  ferry  which  was  being 
operated  between  the  two  cities.  The  reasoning  of 
the  court  in  refusing  such  right  of  taxation  follows: 
"We  think  the  landing  place  was  not  taxable,  upon 
the  principle  that  property  used  for  public  purposes, 
is  not  a  taxable  subject,  within  the  purview  of  the  tax 
laws,  unless  specially  included.  .  .  .  There  would 
be  manifest  incongruity  in  subjecting  to  taxation  for 
public  purposes  property  dedicated  to  or  acquired  un- 
der legislative  authority  for  public  and  governmental 
use.  .  .  .  The  fact  that  the  city  of  New  York  op- 
erates the  ferry  through  lessees,  and  derives  its  rev- 
enue from  the  rental,  and  not  from  the  operation  of 
the  ferry  by  its  immediate  agents  and  servants  does 
not  make  the  franchise  or  the  landing  taxable.  .  .  . 
The  tax  is  imposed  on  the  land  as  the  property  of  the 
city,  and  not  on  the  lessees  in  respect  of  their  in- 
terest." 

§  325.  "Municipal  purpose"  defined. — To  this  same 
effect  is  the  case  of  Somerville  v.  Waltham,  170  Mass. 
160,  48  N.  E.  1092,  which  is  of  interest  for  the  further 
reason  that  it  assists  in  defining  the  scope  of  the  term 
"municipal  purpose"  in  connection  with  this  matter  of 
taxation.     The  court  said:     "There  is  nothing  in  our 

TENNESSEE.— Smith  v.  Nashville,  88  Tenn.  464,  12  S.  W.  924, 
7  L.  R.  A.  469. 

UNITED  STATES.— South  Carolina  v.  United  States,  199  U.  S. 
437,  50  L.  ed.  261. 

VERMONT.— Swanton  v.  Highgate,  81  Vt.  152,  69  All.  667.  16  L. 
R.  A.  (N.  S.)  867. 

VIRGINIA.— Southern  Bell  Tel.  &  T.  Co.  v.  Harrisonburg.  Ill 
Va.  494.  69  S.  E.  348,  31  L.  R.  A.  (N.  S.)  327. 

WISCONSIN.- Monroe  Waterworks  Co.  v.  Monroe,  110  Wis.  11, 
85  N.  W.  685. 


§  326  PUBLIC    UTILITIES.  382 

Statutes  to  prevent  a  city  or  town  from  acquiring  by- 
purchase  land  in  another  city  or  town  for  municipal 
purposes,  if  it  is  necessary  or  expedient  for  the  inter- 
ests of  its  inhabitants  to  do  so.  .  .  .  While  there  is 
no  specific  exemption  from  taxation  in  Pub.  st.  c.  ii, 
§  5,  of  the  property  of  counties  or  municipal  corpora- 
tions, yet  it  is  well  settled  that  such  property,  when 
appropriated  to  public  uses,  is  exempt  from  taxation. 
.  .  .  As  the  land  in  question  was  purchased  for 
the  purpose  of  obtaining  therefrom  gravel  for  the  con- 
struction and  repair  of  streets  in  the  plaintiff  city,  and 
has  since  been  used  for  that  purpose,  we  have  no  doubt 
that  it  is  appropriated  to  public  use,  and  is  exempt 
from  taxation." 

§  326.  Present  use  must  be  public. — That  property 
which  had  been  purchased  for  the  purpose  of  some 
time  being  used  for  enlarging  the  jail  in  a  certain 
town,  but  which  had  not  been  actually  appropriated 
to  that  purpose  and  was  being  rented  to  private  par- 
ties, will  not  be  held  exempt  from  taxation  by  impli- 
cation, because  it  is  not  devoted  to  a  public  use,  was 
held  in  the  case  of  County  of  Essex  v.  Salem,  153 
Mass.  141,  26  N.  E.  431.  In  this  case  the  court  stated 
this  limitation  on  the  general  principal  as  follows: 
"We  are  of  the  opinion  that,  in  the  absence  of  any 
express  exemption  of  the  property  of  counties  from 
taxation,  an  exemption  can  be  implied  only  when  the 
property  is   actually  appropriated   to   public  use." 

§  327.  Water-works  a  public  purpose. — With  ref- 
erence, especially  to  the  matter  of  the  exemption  from 
taxation  of  municipal  property  devoted  to  the  supply- 
ing of  such  public  utilities  as  gas,  water,  and  electric 
light  for  the  city  and  its  citizens,  the  following  cases 
are  discussed  to  illustrate  the  principle  of  law  involved. 


383  EXEMPTION     FROM     TAXATION.  §  328 

The  case  of  Wayland  v.  County  Commissioners,  4 
Gray  (Mass.)  500,  in  1855,  decided  that  lands  taken 
by  the  city  of  Boston  under  an  act,  Statutes,  Massa- 
chusetts, 1846,  c.  167,  for  supplying  that  city  with 
water,  were  not  liable  to  taxation  within  such  city. 
The  court  indicated  its  position  by  saying:  "Regard- 
ing this  land  as  taken  and  holden  for  the  public  use, 
and  the  buildings  erected  upon  it  as  necessarily  inci- 
dent to  such  use,  they  are  both  to  be  held  public 
works,  and  as  such  exempted  from  taxation. 
It  can  only  be  on  the  ground  that  this  land  was  taken 
for  public  uses,  that  the  exercise  of  the  right  of  emi- 
nent domain  by  the  government  can  be  justified.  .  .  . 
It  would  be  difScult,  we  think,  to  find  any  class  of 
cases  in  which  the  right  of  eminent  domain  is  more 
justly  or  wisely  exercised  than  in  provisions  to  supply 
our  crowded  towns  and  cities  with  pure  water — pro- 
visions equally  necessary  to  the  health  and  safety  of 
the  people." 

§  328.  Purchased  by  taxation  and  under  eminent 
domain. — This  principle,  which  is  firmly  established  in 
the  law  and  supported  by  good  sense  and  good  busi- 
ness principles,  was  clearly  enunciated  by  the  court 
of  New  York,  in  1880.  in  the  case  of  Rochester  v. 
Rush,  80  N.  Y.  302,  as  follows:  "The  property  as- 
sessed forms  a  part  of  a  system  of  water-works,  im- 
posed upon  the  city  of  Rochester  by  direct  legislative 
enactment  .  .  .  for  the  use  of  its  inhabitants,  and 
the  extinguishment  of  fires  .  .  .  and  the  work  un- 
dertaken in  pursuance  of  its  directions  must  be  re- 
garded as  executed  for  the  public  good,  and  the  prop- 
erty therefore  held  for  public  purposes.  It  is  itself 
the  result  or  product  of  taxation.  It  stands  in  the 
place  of  the  money  so  raised, and  therefore  can  not 
be  taken  or  diminished  by  taxation.     This  is   clearly 


§  329  PUBLIC    UTILITIES.  384 

SO  Upon  principle,  but  it  is  also  well  settled  by  au- 
thority. ...  I  am  unable  to  perceive  that  in  any 
sense  the  water-works  can  be  regarded  as  the  private 
property  of  the  city  as  distinguished  from  property 
held  by  it  for  public  use.  These  considerations  lead 
to  the  opinion  that  the  property  was  not  taxable,  and 
that  the  proceedings  on  the  part  of  the  assessors  of 
the  town  of  Rush,  in  regard  thereto,  can  not  be  sus- 
tained." 

This  case  is  in  harmony  with  the  great  weight  of 
authority  on  this  subject  and  its  reasoning  has  com- 
mended itself  to  almost  all  our  courts.  In  so  far,  how- 
ever, as  the  court  refused  the  right  of  one  municipality 
to  tax  the  property  of  another  within  its  limits,  al- 
though devoted  to  such  a  public  use  as  the  furnishing 
of  water  to  its  inhabitants,  the  law  of  this  jurisdiction 
has  been  changed  expressly  by  statute  as  appears  from 
the  case  of  People  ex  rel.  v.  Hess,  157  N.  Y.  42,  51 
N.  E.  410,  which  decided  in  1898  that  the  property 
belonging  to  the  water-works  system  of  the  relator, 
the  city  of  Amsterdam,  located  in  the  town  of  Perth, 
was  subject  to  taxation.  The  court  explains  its  deci- 
sion by  saying:  "It  is  conceded  that  prior  to  this 
statute,  chapter  908  of  the  laws  of  1896,  the  property 
assessed  was  not  liable  to  taxation,  as  it  was  held  by 
a  municipal  corporation  for  public  use.  This  exemp- 
tion rested  on  no  statutory  provision,  but  upon  a 
principle  of  the  common  law  supported  by  numerous 
cases  in  England  and  this  country.  We  are  of  the 
opinion  the  Tax  Law  of  1896  has  changed  this  rule 
and  that  property  held  by  a  municipal  corporation  for 
public  use,  but  located  beyond  the  boundaries  of  the 
municipality   is   subject   to   general   taxation." 

§  329.  Property  beyond  limits  of  municipality  may 
be    taxed. — This    limitation    on    the     immunitv    from 


385  EXEMPTION  FROM  TAXATION.  §  33O 

taxation  of  municipal  water-works  property  as  made 
expressly  by  statute  was  fully  accepted  as  binding 
on  the  court.  The  right  of  the  legislature  to  tax  such 
property  of  the  municipality  has  not  been  doubted, 
although  the  expediency  of  doing  so  for  the  general 
purposes  of  taxation  may  be  open  to  question.  Where 
a  large  portion  of  such  property  is  within  the  limits 
of  another  town  or  city  the  courts,  under  statutory 
provision  for  doing  so,  concede  that  the  latter  taxing 
district  is  entitled  to  revenue  from  such  property  in 
the  form  of  taxes  and  the  cases  of  Newport  v.  Unity, 
68  N.  H.  587,  44  Atl.  704,  73  Am.  St.  626,  and  Miller 
V.  Fitchburg,  180  Mass.  32,  61  N.  E.  277,  so  hold. 
This  same  limitation  would  seem  to  have  been  in- 
tended by  the  statute  of  New  Jersey  and  accepted  by 
the  court  in  its  decision  of  this  question  in  State, 
Water  Commissioners  of  Jersey  City  v.  Gaffney,  34 
N.  J,  L.  131.  The  statute  in  question  provided  that: 
"All  real  estate  belonging  to  the  mayor  and  common 
council  of  Jersey  City,  and  held  within  the  county  of 
Hudson  for  purposes  connected  with  the  works  for 
supplying  said  city  with  water  shall  hereafter  be  ex- 
empt from  taxation."  In  holding  such  property  with- 
in said  county  not  liable  for  taxation  the  court  said: 
"It  is  true  that  the  property  was  not  in  actual  use 
when  the  assessment  was  made,  but  there  was  then 
no  indication  of  any  abandonment  of  the  purpose  to 
use  it  for  a  reservoir;  on  the  contrary,  it  is  clear  that 
it  was  held  for  that  necessary  purpose,  and  without 
being  used  for  any  other." 

§  330.  Such  property  only  taxable  by  statutory 
provisions. — The  general  exemption  of  such  property 
without  any  limitation  as  to  location  was  allowed  as 
early  as  1877  in  the  case  of  West  Hartford  v.  Board 
of  Water  Commissioners,  44  Conn.  360,  and  this  rule 

25— Pub.  ut. 


§  330  PUBLIC    UTILITIES.  386 

seems  to  prevail  still  in  the  particular  jurisdiction. 
The  action  arose  out  of  an  attempt  on  the  part  of  the 
plaintiff  municipality  to  tax  that  part  of  the  water- 
works property  of  the  city  of  Hartford  which  was 
within  the  territory  of  the  former  city.  In  refusing 
this  right  the  court  said:  "The  [defendant]  Board  of 
Water  Commissioners  were  authorized  by  the  legis- 
lature to  purchase  and  hold  land  in  the  town  of  West 
Hartford  for  the  purpose  of  storing  and  carrying  it 
thence  to  the  city  of  Hartford  for  the  use  of  its  in- 
habitants. .  .  .  Money  in  the  keeping  of  a  munici- 
pality as  the  result  of  the  exercise  of  its  power  of  tax- 
ation, for  one  public  use,  is  not  to  be  made  to  pay 
tribute  to  another  public  use.  It  has  ceased  to  be 
taxable  property  in  any  legislative  or  judicial  sense. 
The  introduction  of  a  supply  of  water  for  the  preser- 
vation of  the  health  of  its  inhabitants  by  the  city  of 
Hartford  is  unquestionably  .  .  .  for  the  public 
good  in  the  judicial  sense  of  that  term;  not,  indeed, 
as  the  discharge  of  one  of  the  few  governmental 
duties  imposed  upon  it,  but  as  ranking  next  in  order. 
.  .  .  Besides  the  fact  that  rents  at  the  present  time 
are  sufficient  to  pay  the  annual  charges  may  be  only 
a  fortunate  occurrence;  this  state  of  things  may  not 
continue  [and  does  not  make  its  property  subject  to 
taxation]." 

The  same  principle  was  established  by  the  court 
of  Ohio,  in  1894,  in  the  case  of  Toledo  v.  Yeager,  8 
Ohio  C.  C.  R.  318,  as  applied  to  a  municipal  gas  plant. 
The  constitution  of  that  state  provided  that,  "public 
property  used  exclusively  for  any  public  purpose  may 
by  general  laws  be  exempted  from  taxation."  After 
finding  the  use  of  this  p^'operty  to  be  public  on  the 
authority  of  the  deci'/ion  of  the  case  of  State  ex  rel. 
v.  Toledo,  48  Ohio  St.  J 12,  26  N.  E.  1061,  11  L.  R.  A. 
729,  the   court  held  that  under  this   case  the  legisla- 


387  EXEMPTION     FROM     TAXATION.  §  33 1 

ture  had  the  authority  to  exempt  this  property  from 
taxation  and  that  it  had  done  so.  The  court  con- 
cluded its  decision  by  saying:  "The  evidence  shows 
this  property  to  be  devoted  to  the  very  purposes  which 
are  named  in  the  statute,  and  which  the  Supreme 
Court  has  declared  to  be  public  purposes."  These 
decisions  were  sustained  and  this  principle  was  given 
application  in  exempting  from  taxation  municipal  prop- 
erty used  to  supply  natural  gas  to  the  municipality  and 
its  inhabitants  by  this  court  in  the  later  case  of  Toledo 
v.  Hosier,  54  Ohio  418,  43  N.  E.  583,  where  the  court 
said:  "The  constitutional  restriction  upon  the  power 
to  exempt  property  from  taxation  requires  that  the 
exempted  property  must  be  used  exclusively  for  a 
public  purpose.  That  the  property  in  question  is  so 
used  is  determined  in  State  v.  City  of  Toledo,  48  Ohio 
St.  112,  26  N.  E.  1061." 

§331.  Property  exempt  for  owrnership  and  pur- 
pose public. — In  1903  this  principle  of  exemption  was 
clearly  and  fully  enunciated  by  the  court  of  Kansas 
in  the  case  of  Sumner  Co.  v.  Wellington.  66  Kans. 
590,  72  Pac.  216,  60  L.  R.  A.  850,  where  the  following 
language  was  used:  "The  supplying  of  water  to  the 
inhabitants,  while  not  strictly  a  governmental  func- 
tion, so  much  affects  the  health  and  welfare  of  the 
people  as  to  be  closely  akin  to  it.  .  .  .  The  owner- 
ship and  the  purpose  being  public,  there  are  good  rea- 
sons why  the  property  should  be  exempted  from  tax- 
ation. .  .  .  The  statute  makes  public  ownership  of 
property  the  ground  of  immunity  from  taxation,  and 
as  the  plant  in  question  is  absolutely  owned  by  the 
city,  it  is  strictly  within  the  terms  of  that  exemption. 
The  fact  that,  in  establishing  and  carrying  on  a  sys- 
tem of  water-works,  the  city  furnishes  water  to  citi- 
zens and  consumers  for  rental  charges,  does  not  make 


§  332  PUBLIC    UTILITIES.  388 

it  a  mere  business  enterprise  nor  does  it  affect  the 
exemption.  The  earnings  derived  from  the  water  fur- 
nished for  domestic  use  and  to  consumers  is,  as  we 
have  seen,  paid  into  the  city  treasury,  and  used  in 
carrying  on  the  city  government  and  thus  inures  to 
the   benefit  of  the  people  of  the  municipaHty." 

§  332.  Payment  for  service  same  as  payment  of 
taxes. — To  the  same  effect  is  the  case  of  Smith  v. 
Nashville,  88  Tenn.  464,  12  S.  W.  924,  7  L.  R.  A.  469, 
where  the  court  in  upholding  the  exemption  of  the 
property  of  the  municipal  water-works  from  taxation 
said :  "To  provide  the  city  with  water-works  is  very 
broad  and  comprehensive  and  was  obviously  intended 
to  authorize  the  corporation  to  furnish  the  inhabitants 
of  the  city  with  water.  Having  accepted  the  charter, 
and  undertaken  to  exercise  this  authority  in  the  mat- 
ter detailed  by  the  witness,  it  can  not  be  held  that  the 
city  in  doing  so  is  engaging  in  a  private  enterprise, 
or  performing  a  municipal  function  for  a  private  end. 
It  is  the  use  of  corporate  property  for  corporate  pur- 
poses in  the  sense  of  the  Revenue  Law  of  1877.  It 
can  make  no  difference  whether  the  water  be  furnished 
the  inhabitants  as  a  gratuity  or  for  a  recompense,  the 
sum  raised  in  the  latter  case  being  reasonable  and 
applied  for  legitimate  purposes.  So  raising  a  fund  to 
help  defray  the  expense  of  operating  the  water-works, 
and  to  keep  down  the  interest  of  the  city's  indebted- 
ness, incurred  in  the  construction  thereof,  is  no  more 
engaging  in  business  for  gain  and  profit  than  would 
be  the  assessment  and  collection  of  taxes  for  that  or 
any  other  legitimate  object.  To  the  extent  that  money 
is  realized  by  sale  of  water,  if  it  be  so  termed,  the  ne- 
cessity of  laying  taxes  in  the  usual  way  is  diminished." 

§  333.     Kentucky  rule  as  to  municipal  property. — 

This    sound,    legal    and    business    principle    exempting 


389  EXEMPTION     FROM     TAXATION.  §  334 

from  taxation  municipal  property  devoted  to  the  pub- 
lic use  of  supplying  the  city  and  its  inhabitants  with 
municipal  public  utilities  has  been  denied  application 
and  refuted  as  unsound  by  decisions  of  the  court  of 
Kentucky.  The  case  of  Louisville  v.  Commonwealth, 
62  Ky.  295,  I  Duv.  295,  85  Am.  Dec.  624,  decided  in 
1864,  shows  the  attitude  of  that  court  to  be  a  peculiar 
one.  In  the  course  of  its  decision  on  this  subject  of 
tax  exemption  the  court  defined  its  position  by  say- 
ing: "Whatever  property,  such  as  courthouses,  pris- 
ons, and  the  like,  which  becomes  necessary  or  useful 
to  the  administration  of  the  municipal  government, 
and  is  devoted  to  that  use,  is  exempt  from  state  taxa- 
tion; but  whatever  is  not  so  used,  but  is  owned  and 
used"  by  Louisville  in  its  social  or  commercial  capacity 
as  a  private  corporation,  and  for  its  own  profit,  such 
as  vacant  lots,  market  houses,  fire  engines,  and  the 
like,   is   subject   to   taxation." 

§  334.  Distinction  between  public  and  govern- 
mental property  invalid. — That  this  should  not  be  the 
law  is  beyond  question  for  the  application  of  such  a 
rule  might  result  in  the  total  destruction  of  cities  by 
doing  away  with  their  fire  departments  in  permitting 
their  sale  for  nonpayment  of  taxes.  The  position  of 
this  court  can  not  be  defended  from  the  standpoint  of 
law  or  reason  and  its  practical  application  would  be 
highly  dangerous.  Speaking  of  this  decision.  Judge 
Cooley.  in  his  excellent  work  on  Taxation,  says,  page 
267:  "But  this,  unless  confined  to  the  case  of  special 
assessments,  would  seem  to  be  limiting  the  implied 
exemption  unreasonably,  and  certainly  more  than  other 
cases  limit  it." 

§  335.  Municipal  water-works  under  Kentucky 
rule. — This   same   court   in    1890,   in   the  case   of  Clark 


§  335  PUBLIC    UTILITIES.  39O 

V.  Louisville  Water  Co.,  90  Ky.  515,  14  S.  W.  502, 
143  U.  S.  I,  36  L.  ed,  53,  held  unconstitutional  a  stat- 
ute of  that  state  exempting  from  taxation  all  of  the 
property  of  the  defendant  company,  the  entire  stock 
of  which  was  owned  by  the  city  of  Louisville.  The 
court  found  that,  "the  first  section  of  our  Bill  of  Rights 
provided  that  'no  man  or  set  of  men  are  entitled  to 
exclusive,  separate  public  emoluments  or  privileges 
from  the  community  but  in  consideration  of  public 
service.'  We  think  it  evident  that  the  furnishing  of 
water  by  the  company  to  the  city  for  fire  protection 
free  of  charge  was  not  what  induced  the  passage  of 
the  act.  .  .  .  The  reason  which  induced  the  at- 
tempted granting  of  the  exemption  must,  therefore, 
have  been,  as  indeed  the  act  recites,  that  the  sinking 
fund  of  the  city,  or,  in  other  words,  the  city  itself, 
owned  all  the  water  company  stock.  The  question, 
therefore,  is,  did  the  fact  that  the  sinking  fund,  or,  in 
other  words,  the  city,  owned  the  water  company  stock, 
constitute  a  valid  consideration  for  the  exemption? 
A  municipal  corporation  has  a  double  character.  In 
one  it  acts  strictly  in  its  governmental  capacity.  In 
the  other  for  the  profit  or  convenience  of  its  citizens. 
Considered  in  the  latter  light,  it  occupies  the  attitude 
of  a  private  corporation  merely,  while  in  the  former 
it  is  an  arm  of  the  state  government  or  a  part  of  its 
political  power.  .  .  .  The  property  necessary  to  the 
exercise  of  those  duties  which  are  strictly  govern- 
mental is  exempt  from  taxation,  but  this  is  not  so  of 
that  which  is  held  by  the  municipality  for  the  comfort 
of  its  citizens,  individually  or  collectively,  or  for 
money-making  purposes  merely.  .  .  .  The  fact  that 
the  furnishing  of  water  may  incidentally  protect  from 
fire  the  public  buildings  of  the  state  will  not  support 
the    exemption." 


391  EXEMPTION     FROM     TAXATION.  §  335 

The  law  of  this  case  is  followed  and  extended  to 
a  general  application  of  this  rule  denying  the  right  of 
exemption  to  such  property  in  the  case  of  Covington 
V.  Commonwealth,  107  Ky.  680,  39  S.  W.  836,  173  U. 
S.  231,  43  L.  ed.  679,  decided  in  1897.  This  decision 
was  affirmed  in  1900  in  Negley  v.  Henderson,  22  Ky. 
L.  912,  21  Ky.  L.  1394,  59  S.  W.  19,  55  S.  W.  554. 
And  while  on  appeal  the  judgment  of  this  first-men- 
tioned case  was  not  reversed,  the  Supreme  Court  of 
the  United  States  said:  "However  much  we  may 
doubt  the  soundness  of  any  interpretation  of  the  state 
constitution  implying  that  lands  and  buildings  are  not 
public  property  used  for  public  purposes  when  owned 
and  used  under  legislative  authority  by  a  municipal 
corporation,  one  of  the  instrumentalities  or  agencies 
of  the  state,  for  the  purpose,  and  only  for  the  purpose, 
of  supplying  that  corporation  and  its  people  with 
water,  and  when  the  net  revenue  from  such  property 
must  be  applied  in  the  improvement  of  public  ways, 
we  must  assume,  in  conformity  with  the  judgment  of 
the  highest  court  of  Kentucky,  that  section  170  of  the 
constitution  of  that  commonwealth  can  not  be  con- 
strued as  exempting  the  lands  in  question  from  taxa- 
tion. In  other  words,  we  must  assume  that  the  phrase 
'public  purposes'  in  that  section  means  'governmental 
purposes,'  and  that  the  property  here  taxed  is  not  held 
by  the  city  of  Covington  for  such  purposes,  but  only 
for  the'  'profit  or  convenience'  of  its  inhabitants,  and 
is  liable  to  taxation,  at  the  will  of  the  legislature,  un- 
less, at  the  time  of  the  adoption  of  the  constitution  of 
Kentucky,  it  was  exempt  from  taxation  in  virtue  of 
some  contract,  the  obligation  of  which  is  protected  by 
the  Constitution  of  the  United  States." 

This  court  reaffirmed  and  continued  to  follow  the 
Clark  case  in  Louisville  v.  McAteer,  26  Ky.  L.  425,  81 
S.  W.  698,   I   L.  R.  A.   (N.  S.)  766,  decided  in  1904, 


§  336  PUBLIC    UTILITIES.  392 

although  it  expressly  appeared  that  "the  city  owns  all 
its  stock,  or  did  own  all  but  one  or  two  shares  for  the 
years  in  question,"  and  that  "the  plan  is  and  has  been 
to  operate  the  plant  so  as  to  place  the  price  of  water 
to  consumers  at  the  lowest  possible  figure,"  for  as  the 
court  said:  "Property  owned  by  or  on  behalf  of  the 
public,  but  not  used  for  public  purposes,  is  not  ex- 
empt. .  .  .  But  although  its  stock  is  owned  by  the 
city,  and  the  property  is  used  in  supplying  the  citizens 
water,  the  water-works  are  not  'used  for  public  pur- 
poses,' within  the  meaning  of  section  170,  supra,  and 
are  subject  to  taxation  for  state  and  county  purposes. 
Louisville  v.  Com.,  i  Duv.  295,  85  Am.  Dec.  624;  Neg- 
ley  V.  Henderson,  21  Ky.  L.  Rep.  1394,  55  S.  W.  554, 
22  Ky.  L.  Rep.  912,  59  S.  W.  19;  Clark  v.  Louisville 
Water  Co.,  90  Ky.  522,  14  S.  W.  502.  .  .  .  Only 
those  who  consume  its  water  pay  for  it.  Many  thou- 
sands of  citizens  who  are  taxpayers  do  not  patronize 
the  water  company  at  all,  but  depend  for  their  water 
supply  on  private  wells  and  cisterns,  or  upon  the  pub- 
lic wells.  If  the  water  company  is  compelled  to  pay 
a  municipal  tax,  it  must  collect  the  money  with  which 
to  pay  it,  not  by  taxation,  but  from  its  water  rates — 
from  its  customers.  This  will  result  in  those  who  use 
that  water  paying  a  slightly  increased  rate  for  it." 

§  336.  Limitation  denying  right  to  sell  for  non- 
payment of  taxes. — It  should  be  noted,  however,  that 
this  court  in  Covington  v.  District  of  Highlands,  113 
Ky.  612,  68  S.  W.  669,  24  Ky.  L.  433,  no  S.  W.  338,  in 
following  the  law  enunciated  in  the  Clark  case,  supra, 
denied  the  right  to  sell  the  municipal  water-works 
property  for  nonpayment  of  taxes  assessed  against  it; 
but  provided  in  case  of  failure  to  make  such  payment, 
a  receiver  for  the  property  might  be  appointed  to  col- 
lect funds  with  which  to  make  such  payment.     While 


393  EXEMPTION  FROM  TAXATION.  §  336 

this  may  indicate  the  desire  of  this  court  to  show  some 
consideration  for  the  preservation  of  the  integrity  of 
such  a  system,  in  the  interest  of  the  public  which  is 
absolutely  dependent  upon  its  continued  operation,  it 
is  submitted  that  the  effect  of  a  receiver  in  the  great 
majority  of  cases  would  be  fatal  to  the  successful  con- 
tinuation of  such  a  system,  and  would  result  in  its  final 
dissolution   and  destruction. 

In  reversing  the  case  of  Covington  v.  Common- 
wealth, 107  Ky.  680,  39  S.  W.  836,  173  U.  S.  231,  43 
L.  ed.  679,  and  the  subsequent  cases  which  followed 
the  rule  therein  announced,  this  court  in  the  case  of 
Frankfort  v.  Commonwealth,  29  Ky.  L.  699,  94  S.  W. 
648,  decided  in  1906,  said:  "If  each  municipality  in 
its  prescribed  sphere  is  imperium  in  imperio  and  ad- 
ministers the  law  for  Kentucky,  it  is  difficult  to  under- 
stand why  it  should  be  required  to  pay  taxes  to  the 
state  and  county  on  property  held  for  public  purposes, 
any  more  than  the  city  should  require  the  county  and 
state  to  pay  taxes  on  property  held  by  them  situated 
within  the  municipality.  .  .  .  This  being  true,  it 
would  seem  that,  when  taxes  can  be  levied  and  col- 
lected for  public  purposes  only,  then  the  property 
acquired,  with  the  taxes  thus  levied  and  collected, 
should  be  regarded  as  acquired  and  used  for  public 
purposes.  Municipalities  have  no  funds  except  those 
arising  from  the  levy  and  collection  of  taxes.  They 
are  necessarily  levied  and  collected  for  public  pur- 
poses. The  property  which  they  are  authorized  to  ac- 
quire of  necessity  must  have  been  acquired  with  the 
money  derived  from  the  levy  and  collection  of  taxes 
and  must  necessarily  be  regarded  and  acquired  for 
public  purposes. 

"The  legislature  authorizes  municipalities  to  levy 
and  collect  taxes  for  the  purpose  of  building  and  main- 
taining  water-works    and    lighting    plants.      They    are 


§  336  PUBLIC    UTILITIES.  394 

acquired  for  public  purposes  and  maintained  for  public 
purposes.  They  are  paid  for  with  money  that  arises 
from  the  levy  and  collection  of  taxes  which  can  only 
be  levied  and  collected  for  public  purposes.  .  .  . 
Therefore  the  legislature  has  recognized  water-works 
and  lighting  plants  as  public  necessities.     .     . 

"We  rather  base  our  conclusion  upon  the  fact  that 
the  municipality,  by  reason  of  its  agency  of  the  state 
government,  is  required  to  look  after  the  health  of  its 
citizens,  and  it  supplies  water  to  them  for  compensa- 
tion as  the  best  means  of  accomplishing  that  purpose, 
and  that  any  excess  of  income  over  the  expenses  of 
maintaining  the  water-works  goes,  not  to  the  munici- 
pality in  its  private  capacity,  but  to  it  in  its  public 
capacity,  for  the  relief  of  the  citizens  of  public  bur- 
dens." 

This  decision  was  affirmed  in  1907  in  Common- 
wealth V.  Paducah,  31  Ky.  L.  528,  102  S.  W.  882.  And 
finally  this  court,  in  1909,  in  the  case  of  Ryan  v.  Lou- 
isville, 133  Ky.  714,  118  S.  W.  992,  said:  *Tn  the 
case  of  Bell,  Sheriff,  v.  Louisville  Water  Company, 
106  S.  W.  862,  this  court  held  that  the  same  property 
was  subject  to  taxation  because  the  title  was  at  that 
time  vested  in  a  corporation  known  as  the  Louisville 
Water  Company,  although  the  whole  of  the  capital 
stock  of  that  company  was  owned  by  the  city  of  Lou- 
isville. Immediately  following  the  decision  in  that 
case,  the  water  company  paid  all  taxes  then  due  or 
claimed,  together  with  the  interest  and  penalties  re- 
sulting from  their  previous  nonpayment.  Since  that 
time,  however,  and  prior  to  September  i,  1908,  the 
entire  water-works  plant,  its  franchise,  and  effects 
were  transferred  and  conveyed  by  the  Louisville  Water 
Company  to  the  appellee  city  of  Louisville,  and  the 
title  thereto,  at  the  time  it  would  have  been  assessed 


395  EXEMPTION  FROM  TAXATION.  §  337 

by  appellant  but  for  the  injunction  preventing  its  as- 
sessment, was  vested  in  the  city  of  Louisville.  .  .  . 
"Conceding  the  transfer  of  the  property  to  the  city 
to  be  valid,  does  that  relieve  it  from  the  burden  of 
taxation?  The  question  must  be  given  an  affirmative 
answer,  unless  this  court  should  conclude  to  overrule 
numerous  recent  cases,  in  which  it  was  held  that  such 
property  can  not  be  taxed,  because  relieved  of  that 
burden  by  section  170  of  the  constitution,  which  de- 
clares: 'There  shall  be  exempt  from  taxation  public 
property  used  for  public  purposes'.  As  the  city  of 
Louisville  is  but  a  political  subdivision  of  the  state, 
and  may  under  its  charter  own  and  maintain,  for  the 
health,  safety,  and  comfort  of  its  inhabitants,  the  sys- 
tem of  water-works  to  which  it  has  legally  acquired 
title,  such  use  of  the  property,  being  a  use  for  public 
or  governmental  purposes  exclusively,  exempts  it  from 
taxation.  This  conclusion  is  so  well  supported  by  the 
subjoined  list  of  authorities  that  further  discussion  of 
the  matter  would  be  a  work  of  supererogation.  Com- 
monwealth V.  City  of  Covington  (Ky.),  107  S.  W.  231, 
14  L.  R.  A.  (N.  S.)  1214;  City  of  Frankfort  v.  Com- 
monwealth (Ky.).  94  S.  W.  648;  City  of  Owensboro 
V.  Commonwealth,  105  Ky.  344,  49  S.  W.  320,  44  L.  R. 
A.  202;  City  of  Covington  v.  District  of  Highlands 
(Ky.),  iioS.  W.  338." 

§  337.  Statute  taxing  property  producing  income 
in  Pennsylvania. — The  court  of  Pennsylvania,  as  early 
as  1880,  in  the  case  of  Chadwick  v.  Maginnes,  94  Pa. 
St.  117,  denied  the  right  of  a  municipal  water-works 
plant  to  exemption  from  taxation  under  a  statute  sub- 
jecting to  taxation  all  property  not  expressly  exempt, 
and  especially  property  from  which  any  income  on 
revenue  is  derived.  In  this  decision  the  court  found 
that:     "While  the  plaintiffs  in  error  are  in  one  sense 


§  T,2>^  PUBLIC    UTILITIES.  396 

a  public  corporation,  the  profits  and  benefits  enure 
specially  to  the  citizens  of  the  South  Ward,  even  to 
the  extent  it  may  be  of  relieving  them  from  municipal 
taxes.  Surely  it  was  never  intended  that  such  a  cor- 
poration should  be  exempt  from  all  taxation,  while 
others  are  compelled  to  bear  their  share  of  the  public 
burden."  While  the  law  of  this  case  is  unsound  under 
practically  all  the  authorities,  we  have  found  it  is  the 
legislature  rather  than  the  court  that  is  responsible 
for  the  inconsistent  position  taken  by  this  case.  In 
providing  that  all  property  not  expressly  exempt  and 
especially  that  from  which  any  revenue  is  derived 
should  be  taxable,  it  is  submitted  that  an  erroneous 
distinction  was  made  for  the  classification,  for,  under 
the  argument  advanced  earlier  in  this  discussion  and 
by  the  cases  cited,  the  fact  that  revenue  is  realized 
from  municipal  property  is  not  a  sound  basis  for  sub- 
jecting it   to  taxation. 

§  338.  Property  providing  private  service  taxed 
in  Vermont. — The  court  of  Vermont,  however,  in  the 
case  of  Swanton  v.  Highgate,  8i  Vt.  152,  69  Atl.  667, 
16  L.  R.  A.  (N.  S.)  867,  also  decided  in  1908,  contrary 
to  the  general  rule,  that  under  the  statutes  of  that 
state  municipal  property  located  in  different  taxing 
districts  and  supplying  light  for  public  and  private  use 
was  not  exempt,  for  in  furnishing  the  private  supply 
the  use  was  not  public  within  the  meaning  of  the  par- 
ticular statutory  provision.  In  the  course  of  this  un- 
usual decision  the  court  said :  "The  plaintiff  claims 
that  said  property  was  exempt  from  taxation  because 
used  for  a  public  use  within  the  meaning  of  the  statute 
exempting  property  thus  used.  The  property  was 
then  used,  and  is  still  used,  to  light  the  plaintiff's 
streets,  to  supply  its  inhabitants  and  their  public  build- 
ings with   lights,   to   light   the   streets   and   supply  the 


397  EXEMPTION     FROM     TAXATION.  §  339 

inhabitants  and  the  piibHc  buildings  of  that  part  of 
the  physical  village  of  Swanton  that  is  without  the 
corporate  limits  of  the  plaintiff,  and  within  the  town 
of  Swanton,  and,  in  like  manner  to  light  the  streets 
and  supply  the  inhabitants  of  the  villages  of  Highgate 
Center  and  Highgate  Falls  in  the  town  of  Highgate. 
.  .  .  The  rest  of  the  property  was  put  to  a  mixed 
use,  partly  public  and  partly  private,  with  no  way  of 
telling  how  much  was  put  to  either  use,  and  therefore 
the  whole  was  taxable." 

§  339-  Property  of  private  parties  taxable. — Where 
the  property  providing  municipal  public  utilities  is 
private  and  not  owned  by  the  municipality  itself  it 
can  not  be  exempt  from  taxation,  because  it  is  not 
public  property,  being  used  for  a  public  or  municipal 
purpose,  but  it  is  private  property  invested  for  profit. 
An  agreement  of  a  municipality  with  the  municipal 
public  utility  owned  and  controlled  by  private  capital 
exempting  its  property  from  taxation  as  such  is  in- 
valid for  the  reason  that  it  is  beyond  the  power  of 
the  municipality  to  exempt  such  property  from  taxa- 
tion, unless  power  to  do  so  has  been  clearly  and  ex- 
pressly conferred  on  the  municipality  by  the  legisla- 
ture,  acting  within   constitutional  authority. 

§  340.  Contract  of  municipality  to  exempt  such 
property  from  taxation. — As  the  municipality  can  not 
exempt  this  class  of  property  from  taxation,  because 
it  is  private  and  invested  for  profit,  either  gratuitously 
or  for  an  adequate  consideration,  the  courts  will  set 
aside  as  ultra  vires  any  such  attempt  on  the  part  of 
the  municipality.  The  courts,  however,  are  not  agreed 
as  to  the  effect  and  validity  of  an  agreement  made 
by  the  municipality  with  the  public  service  corpora- 
tion to  pay  as  a  consideration  for  the  municipal  pub- 


§  341  PUBLIC    UTILITIES.  398 

lie  Utility  service  rendered  it  the  amount  of  municipal 
taxes  or  to  reimburse  or  forego  the  collections  of  such 
municipal  taxes  to  the  extent  of  the  value  of  the  mu- 
nicipal public  utility  service  furnished.  The  decisions 
refusing  to  uphold  such  an  agreement  are  based  on  a 
strict  technical  construction  of  the  contract,  which 
often  does  in  words  provide  for  exempting  such  prop- 
erty from  taxation,  or  of  an  agreement  waiving  the 
collection  of  such  taxes  in  the  amount  and  to  the  ex- 
tent that  the  municipal  public  utility  service  is  fur- 
nished. 

§  341.  Contract  treated  as  payment  for  public  serv- 
ice.— Since  the  municipality  can  not  actually  make 
such  exemptions  or  waive  the  collection  of  such  taxes 
the  courts  refusing  to  uphold  such  an  agreement  are 
supported  by  the  authorities  generally,  in  a  strict  lit- 
eral construction  of  the  principle  prohibiting  the  mu- 
nicipality from  doing  so.  On  the  other  hand,  a  num- 
ber of  decisions  give  force  and  effect  to  such  an  agree- 
ment and  uphold  rights  of  the  parties  to  it  where  the 
consideration  is  a  fair  and  adequate  one  on  the  ground 
that  it  is  practical  and  in  effect  only  an  agreement 
of  the  municipality  to  pay  a  fair  charge  for  the  service 
rendered  it  by  placing  such  amount  to  the  credit  of 
the  taxes  assessed  against  the  corporation  providing 
it  with  such  service;  so  that  while  the  express  agree- 
ment may  provide  for  certain  exemption  from  taxation 
in  effect  it  only  amounts  to  the  municipality  retaining 
the  money  due  for  the  service  instead  of  paying  it  to 
the  public  service  corporation  and  then  collecting  it 
back  as  taxes. 

The  practical  aspect  of  this  principle  is  well  stated 
by  the  court  in  the  case  of  Bartholmew  v.  Austin,  85 
Fed.  359,  decided  in  1898,  where  the  court  said:  "We 
do  not  construe  the  contract  as  granting  an  exemption 


399  EXEMPTION     FROM     TAXATION.  §  342 

from  taxation.  'Exemption'  means  free  from  liability, 
from  duty,  from  service.  It  is  a  grace,  a  favor,  an 
immunity;  taken  out  from  under  the  general  rule,  not 
to  be  like  others  who  are  not  exempt,  to  receive,  and 
not  make  a  return.  This  being  the  meaning  of  the 
term,  the  transaction  presented  in  section  ii  is  not  an 
exemption  from  taxation.  The  city  needed  the  water 
for  the  several  purposes  named.  To  supply  it  re- 
quired time,  expense,  and  labor.  These  things  were  of 
value.  The  taxes  to  be  levied  were  to  be  legal  obli- 
gations for  money.  The  obligations  were  of  value. 
On  a  comparing  of  values,  the  parties  being  compe- 
tent to  contract,  it  was  concluded  that  the  values  were 
equal,  and  the  one  should  be  offset  by  the  other. 
There  is  no  claim  that  the  one  value  was  not  as  great 
as  the  other.  No  imposition  on  the  one  hand,  nor 
favoritism  on  the  other,  can  be  inferred.  .  .  ,  Even 
if  section  ii  should  be  construed  as  granting  an  ex- 
emption from  taxation,  and  therefore  void,  the  contract 
is  not  necessarily  and  thereby  void,  and  for  water 
actually  furnished  by  the  City  Water  Company,  under 
section  ii,  a  recovery  may  be  had  on  a  quantum 
valebant." 

§  342.  Consideration  of  such  contract  must  be  rea- 
sonable.— The  same  principle  is  differently  expressed 
and  illustrated  by  another  practical  decision  by  the 
court  in  the  case  of  Maine  Water  Co.  v.  Waterville, 
93  Maine  586.  45  Atl.  830,  49  L.  R.  A.  294,  decided 
in  1900,  where  the  court  in  upholding  such  an  agree- 
ment says:  "But  what  we  hold  is  that  a  municipality 
may,  for  a  reasonably  adequate  consideration,  in  the 
way  of  service  rendered  to  it  for  municipal  purposes, 
agree  to  make  compensation  therefor,  for  a  term  of 
years  not  unreasonably  long,  either  in  whole  or  in 
part,  by  reimbursing  the  company,  in  whole  or  in  part, 


§  343  PUBLIC    UTILITIES.  4OO 

the  amount  that  the  company  performing  the  service 
may  be  obliged  to  pay  as  taxes  assessed  upon  its  prop- 
erty. We  think  that  this  conclusion  is  sustained  both 
by  reason  and  the  weight  of  authority.  .  .  .  We 
are  therefore  forced  to  the  conclusion,  from  the  value 
of  the  water  service  that  has  been  actually  furnished 
— than  which  no  better  evidence  could  be  produced — 
that  the  contract  when  made  was  fair  and  reasonable; 
that  the  city  thereby  received  an  amply  adequate  con- 
sideration for  its  agreement,  and  has  since  received  a 
fair  equivalent  for  its  payments;  and  that  the  contract 
was  not  intended  as  the  cover  of  an  illegal  attempt 
to  exempt  the  company's  property  from  taxation." 

§  343*  Contract  not  in  effect  an  exemption. — That 
such  an  agreement  does  not  in  effect  amount  to  an 
exemption  of  the  property  from  taxation  follows  nec- 
essarily from  the  fact  that  the  value  of  the  service 
rendered  is  equal  to  the  amount  of  the  taxes  credited 
to  the  account  of  the  corporation  furnishing  the  serv- 
ice for,  as  the  court  says  in  the  case  of  Ludington 
Water-Supply  Co.  v.  Ludington,  119  Mich,  480,  78  N. 
W.  558,  decided  in  1899:  "The  contract  does  not  pur- 
port to  provide  that  the  property  of  plaintiff  shall  not 
be  assessed.  Its  terms  indicate  that  it  was  intended  by 
both  parties  that  it  would  be  assessed,  and  that  the 
plaintiff  would  pay  the  taxes  on  the  property  up  to 
a  certain  amount,  and  the  defendant  all  in  excess,  as 
a  part  of  the  consideration  for  the  supply  of  water. 
The  city  no  more  exempts  the  property  of  the  plain- 
tiff from  taxation  by  such  an  agreement  than  does  the 
mortgagor  who  agrees  to  pay  the  taxes  levied  against 
the  mortgaged  property  exempt  the  mortgaged  prop- 
erty from  taxation.  Possibly  neither  possesses  the 
power  to  exempt  property  from  taxation.  Certainly, 
neither  has  done  it.    .    .    .    We  do  hold  that  an  agree- 


40I  EXEMPTION     FROM     TAXATION.  §  344 

ment  to  pay  a  portion  of  the  taxes  which  may  be  as- 
sessed against  plaintiff,  made  upon  good  considera- 
tion, is  not  an  exemption  from  taxation  in  any  proper 
legal   sense." 

§  344.  Strict  construction  denies  validity  of  agree- 
ment.— The  case  of  Dayton  v.  Bellevue  Water  &  Fuel 
Gaslight  Co.,  119  Ky.  714,  24  Ky.  L.  194,  68  S.  W.  142, 
decided  in  1902,  refuses  to  uphold  an  agreement  ex- 
empting the  property  of  the  defendant  company  from 
municipal  taxes  for  a  fixed  period  by  a  strict  literal 
construction  of  the  principle,  universally  established, 
that  the  municipality  has  no  such  power  unless  clearly 
and  expressly  conferred  upon  it  in  accordance  with 
constitutional  provisions  to  that  effect.  In  the  course 
of  this  decision  the  court  says:  "The  city  also  agreed 
that  the  property  used  in  the  construction  of  the  works 
should  be  exempt  from  all  city  taxes,  and  that  the 
contract  should  be  in  force  for  a  period  of  twenty-five 
years  from  the  date  thereof.  .  .  .  It  is  clear  from 
this  case  that  the  general  assembly  could  not  have 
authorized  the  city  of  Dayton  to  have  exempted  the 
property  of  appellee  from  taxation.  But  there  is  noth- 
ing in  the  act  empowering  the  board  of  council  of 
Dayton  to  contract  for  water  for  fire  and  domestic 
purposes  which  authorized  them,  either  expressly  or 
by  implication,  to  exempt  appellee's  property  from 
taxation.  But  it  is  urged  that  this  provision  of  the 
contract  is  not  really  an  exemption  from  taxation,  but 
a  part  of  the  consideration  which  entered  into  the  con- 
tract between  the  parties,  and  is,  for  this  reason,  not 
in  conflict  with  either  the  letter  or  spirit  of  the  con- 
stitution.     This    proposition   we    think    unsound." 

A  decision  to  the  same  effect  was  rendered  by  the 
Supreme  Court  of  Florida  in  the  case  of  Tampa  v. 
Kaunitz.  39   Fla.  683,   2^   So.  416,   in   1898,  the  court 

26— Pub.  ut. 


§  345  PUBLIC    UTILITIES.  402 

saying:  "We  have  not  been  cited  to  any  statute  of 
this  state  authorizing  the  city  to  exempt  this  species 
of  property  from  taxation,  nor  to  make  a  contract  so 
to  do.  Without  vaHd  legislative  authority,  no  city  or 
tow^n  has  pov^er  to  bind  itself,  by  contract,  either  to 
forbear  to  impose  taxes  on  particular  property,  or  to 
impose  them  only  under  given  limitations,  or  on  cer- 
tain given  conditions.  Black,  Tax  Titles,  §  63 ;  Cooley, 
Tax'n,  p.  200;  I  Blackw.,  Tax  Titles,  §§  no,  117." 

§  345.  Practical  statement  of  the  rule. — The  Su- 
preme Court  of  Wisconsin,  moreover,  in  the  recent 
case  of  Monroe  Waterworks  Co.  v.  Monroe,  no  Wis. 
II,  85  N.  W.  685,  decided  in  1901,  furnishes  a  compre- 
hensive statement  of  this  principle  from  the  practical 
viewpoint,  as  follows:  "Where,  however,  the  agree- 
ment is  express,  and  the  intention  evident,  to  exempt 
property  and  release  it  from  tax  burdens,  it  is  void, 
and  will  not  be  enforced.  .  .  .  The  rule  is  equally 
well  established  that  it  is  competent  for  a  city  and  a 
company  to  agree  that,  as  the  price  of  services  to  be 
rendered,  the  city  will  pay  a  sum  equal  to  the  amount 
of  municipal  taxes  to  be  levied.  Of  course,  it  must 
appear  that  the  sum  so  stipulated  to  be  paid  is  a  fair 
and  just  allowance  to  compensate  for  the  actual  value 
of  the  services  to  be  rendered,  and  that  the  stipulation 
is  bona  fide,  and  not  in  the  nature  of  an  evasion  of 
the  law  against  exemption  from  taxes." 


CHAPTER  XVIII. 

SALE  OF  PROPERTY  PROVIDING  MUNICIPAL 
PUBLIC  UTILITIES. 

Section. 

346.  Municipal  control  by  limitation  on  alienation. 

347.  Attitude  of  courts  on  municipal  control  and  ownership. 

348.  Trust  property  devoted  to  public  use  can  not  be  sold  without 

statutory  authority. 

349.  Duty  to  render  service  personal. 

350.  Alienation  of  property  permitted  in  public  interest. 

351.  Municipal  water-works  public  property  like  parks. 

352.  Municipality  trustee   for  public  of  its  water   and   light  plant. 

353.  Transfer  of  property  by  lease  must  be  authorized  by  statute. 

354.  Duty  to  serve  public  can  not  be  evaded  by  alienation. 

355.  Municipal  ownership  conserved  for  public  interest. 

356.  Public  interest  and  private  gain  antagonistic. 

357.  Abandoned  property  may  be  alienated  by  municipality. 

358.  Pipe   lines   on   failure   of  gas  may   be  alienated   in   public   in- 

terest. 

359.  Transfer  to  municipality  favored  in  interest  of  public. 

360.  Municipal  option  to  purchase  provided  in  franchise. 

361.  Legislative  authority  must  be  express  to  permit  transfer. 

362.  Franchise  personal  to  grantee  and  not  transferable. 

363.  Combination  agreements  defeating  competition  are  invalid. 

364.  Contracts   fixing   rates   or   combining   competitors   invalid. 

365.  Stock  control  of  competing  concerns  invalid. 

366.  Forced  sales  of  such  property  also  prohibited. 

367.  Right  of  alienation  expressly  given  by  statute  valid. 

§  346.  Municipal  control  by  limitation  on  aliena- 
tion.— The  ease  with  which  municipal  corporations 
may  themselves  provide  municipal  public  utilities  or 
control  them  in  the  hands  of  private  capital  depends, 
in  an  inverse  ratio,  upon  the  power  which  corporations 
providing  such  utilities  have  to  alienate  their  property. 
For  experience  has  shown  that  in  almost  all  cases  pri- 
vate corporations  stand  ready  to  take  over  the  opera- 
tion of  municipal  public  utilities  where  municipal  cor- 
403 


§  347  PUBLIC    UTILITIES.  404 

porations  are  becoming  embarrassed  or  are  reported 
to  have  made  a  failure  of  their  operation.  Indeed,  it 
has  frequently  been  charged  that  influences  have  been 
brought  to  bear  to  secure  an  inefficient  operation  by- 
municipal  corporations  of  such  public  utilities  with 
the  purpose  in  view  of  cultivating  among  the  people 
a  feeling  hostile  to  municipal  and  favorable  to  private 
operation.  And  obviously  the  power  of  municipal  reg- 
ulation and  control  over  the  privately  owned  munici- 
pal public  utility  is  greatly  enhanced  by  limitations 
placed  on  the  power  of  such  corporations  to  sell  and 
convey  their  property  which  is  useful  and  necessary 
in  providing  its  public  utility  service. 

§  347.  Attitude  of  courts  on  municipal  control  and 
ownership. — The  attitude  of  the  courts  in  regard  to 
the  power  of  municipal  corporations  to  dispose  of  mu- 
nicipal public  utility  plants  has  therefore  an  important 
bearing  on  the  question  of  the  attitude  of  the  courts 
toward  an  increase  in  the  sphere  of  municipal  activity 
in  the  matter  of  the  ownership  or  control  of  municipal 
public  utilities. 

§  348.  Trust  property  devoted  to  public  use  can 
not  be  sold  without  statutory  authority. — The  supply- 
ing of  municipalities  and  their  citizens  with  such  pub- 
lic utilities  as  gas,  water,  electric  light,  transportation 
and  communication  for  public  and  private  use  by  the 
municipal  corporation  or  by  private  capital  is  the  per- 
formance of  a  public  duty,  and  the  property  so  used 
is  charged  with  a  public  trust  and  is  devoted  to  a  pub- 
lic purpose.  Such  property  is  dedicated  irrevocably 
to  the  performance  of  this  trust  due  the  public  and  for 
its  benefit  and  that  of  the  inhabitants  of  the  munici- 
pality. It  is  a  fundamental  principle  that  the  trustee 
can  not  disable  itself  from  performing  the  trust  by 
disposing  of  the  property  or  means  necessary  to  carry 


405  SALE    OF    PROPERTY.  §  349 

out  the  purposes  of  the  trust  relation  without  express 
authority  from  the  party  creating  the  trust  or  direct- 
ing its  administration.  The  power  does  not  inhere  in 
the  trustee  to  defeat  the  carrying  out  of  the  trust  by 
disposing  of  the  trust  property.  The  interests  of  the 
beneficiaries  under  the  trust  are  guarded  against  any 
loss  on  this  account  and  conserved  by  the  courts  hold- 
ing that  such  property  can  not  be  disposed  of  by  the 
municipality  or  other  corporation  owning  it  unless 
under  authority  conferred  specially  by  statute.  The 
state  alone,  which  attends  to  the  matter  of  creating 
these  trusts  as  well  as  to  the  selection  of  the  trustees, 
has  the  power  to  provide  for  their  destruction  by  sale 
or  for  their  diversion  as  to  trustees  by  lease  or  assign- 
ment. Having  the  sole  power  to  create,  the  state 
alone  has  the  ability  to  provide  for  a  change  of  trustee 
or  a  winding-up  of  the  trust  entirely;  so  that  in  the 
absence  of  express  legislative  authority  the  courts  re- 
fuse to  imply  the  right  in  the  municipal  or  other  cor- 
poration, after  having  accepted  the  trust,  to  renounce 
its  duties  thereunder  or  to  dispose  of  the  trust  prop- 
erty and  thus  defeat  the  further  carrying  out  of  the 
trust.  Such  corporation  must  continue  to  perform  the 
duties  to  the  public  after  having  once  assumed  the 
trust  and  undertaken  to  serve  the  public  needs  and 
those  of  the  inhabitants.  Dillon,  Alun.  Corp.  §§  991, 
1 102,  and  cases  cited. 

§  349.  Duty  to  render  service  personal. — When  the 
power  to  own  and  operate  such  plants  for  supplying 
public  utilities  has  been  granted  to  and  accepted  by 
any  corporation,  a  franchise  is  conferred  upon  it  for 
the  purpose  of  securing  some  advantage  to  the  public 
and  for  the  benefit  of  the  inhabitants  in  their  private 
capacity.  Such  beneficiaries  have  the  right  to  com- 
plain in  case  of  its  relinquishment.     This  rule  is  based 


§  350  PUBLIC    UTILITIES.  406 

on  the  general  principle  of  trusts  as  well  as  upon  the 
rule  that  quasi-public  corporations  are  formed  in  order 
to  serve  the  public.  The  duty  imposed  is  a  personal 
one  and  the  right  to  perform  it,  together  with  the 
special  privileges  pertaining  thereto,  is  granted  per- 
sonally as  a  franchise,  on  condition  that  the  grantee 
continue  in  personal  control  of  such  power  and  in  the 
performance  of  its  duties.  The  carrying  out  of  the 
duties  of  serving  the  public  under  such  a  franchise  is 
regarded  as  of  special  importance  and  the  obligation 
is  recognized  as  being  peculiarly  personal.  Having 
selected  a  particular  corporation  which  is  responsible 
and  capable  of  executing  the  duties  of  the  trust  to  the 
public  for  which  are  granted  special  privileges,  amount- 
ing in  most  cases  practically  to  a  monopoly,  the  law 
does  not  permit  it  to  transfer  its  rights  and  the  ac- 
companying duties  to  another  party  which  may  or  may 
not  be  responsible  and  capable  of  adequately  serving 
the  municipality  and  its  inhabitants. 

§  350.  Alienation  of  property  permitted  in  public 
interest. — If  at  any  time  it  may  appear  that  the  in- 
terests of  the  beneficiaries  could  be  best  served  by 
some  party  other  than  the  original  grantee,  the  state 
which  granted  the  franchise  may  in  its  discretion  per- 
mit such  change  of  grantees,  but  this  must  be  pro- 
vided for  expressly  by  the  statute.  This  rule  of  law 
is  adhered  to  strictly  because  it  is  believed  that  the 
interests  of  the  public  are  thereby  best  conserved. 
For  observation  and  experience  seems  to  indicate  that 
the  interests  of  the  public  are  not  paramount  as  to 
private  parties  who  engage  in  furnishing  these  public 
utilities.  The  desire  for  dividends  too  often  seems  to 
predominate  over  that  of  serving  the  best  interests  of 
the  public  except  in  an  increasing  number  of  instances 
where  fortunately  the  two  purposes   are  regarded  as 


407  SALE    OF    PROPERTY.  §  350 

consistent  and  identical.  However,  in  many  cases  the 
motive  of  immediate  profit  controls,  which  fact  re- 
quires very  extensive  control  to  be  exercised  over 
private  grantees  of  such  franchises  or,  in  lieu  thereof, 
where  there  is  not  sufficient  control  to  insure  that  the 
public  will  be  served  adequately  and  at  fair  cost  for 
the  service,  it  becomes  necessary  that  the  public  serve 
itself  directly  or  that  it  have  the  control  which  accom- 
panies ownership,  while  the  actual  operation  is  pro- 
vided for  by  a  leasing  of  the  plant  owned  by  the  city. 
This  matter,  however,  is  reserved  for  later  discussion 
and  an  examination  of  the  authorities  for  the  forego- 
ing statements  will  now  be   attempted/ 

1  CALIFORNIA.— South  Pasadena  v.  Pasadena  Land  &  Water 
Co.,  152  Cal.  579,  93  Pac.  490. 

FEDERAL.— Austin  v.  Bartholomew,  107  Fed.  349,  1S3  U.  S.  698, 
46  L.  ed.  395;  Cumberland  Tel.  &  T.  Co.  v.  Evansville,  127  Fed.  187, 
143  Fed.  238;  Indianapolis  v.  Consumers'  Gas  Trust  Co.,  144  Fed. 
640;  New  Albany  Waterworks  v.  Louisville  Banking  Co.,  122  Fed.  776. 

ILLINOIS. — People  ex  rel.  Fitzhenry  v.  Union  Gas  &  Electric 
Co.,  254  111.  395,  98  N.  E.  768. 

INDIANA.— Lake  County  Water  &  Light  Co.  v.  Walsh,  160  Ind. 
32,  65  N.  E.  530,  98  Am.  St.  264;  De  Motte  v.  Valparaiso,  161  Ind.  319, 
67  N.  E.  985. 

KANSAS.— Keene  Syndicate  v.  Wichita  Gas,  Electric  Light  & 
Power  Co.,  69  Kans.  284,  76  Pac.  834,  67  L.  R.  A.  61,  105  Am.  St.  164. 

MASSACHUSETTS.— Attorney  General  v.  Haverhill  Gaslight 
Co.    (Mass.),  101   N.   E.   1061. 

NEW  JERSEY.— McCarter  Atty.  Gen.  v.  Vineland  Light  & 
Power  Co.,  72  N.  J.  Eq.  767,  70  Atl.  177. 

OREGON.— State  v.  Portland  General  Electric  Co.,  52  Ore.  502, 
95  Pac.  722. 

PENNSYLVANIA.— Bailey  v.  Philadelphia,  1S4  Pa.  594,  39  Atl. 
494,  39  L.  R.  A.  837,  63  Am.  St  812;  Greensburg  Borough  v.  West- 
morland Water  Co.,  (Pa.),  87  Atl.  995. 

SOUTH  DAKOTA.— Huron  Waterworks  Co.  v.  Huron,  7  S.  Dak. 
9,  62  N.  W.  975,  30  L.  R.  A.  848.  58  Am.  St.  817. 

UNITED  STATES.— Gibbs  v.  Consolidated  Gas  Co.  of  Baltimore, 
130  U.  S.  396,  32  L.  ed.  979. 

UT.A.H.— Ogden  City  v.  Bear  Lake.  &c..  Waterworks  Co.,  16 
Utah  440,  52  Pac.  697,  41  L.  R.  A.  305;  Ogden  City  v.  Waterworks 
&  Irr.  Co.,  28  Utah.  25.  76  Pac.  1069. 


§351  PUBLIC    UTILITIES.  408 

§351.  Municipal  water-works  public  property  like 
parks. — The  case  of  Huron  Waterworks  Co.  v.  Huron, 
7  S.  Dak.  9,  62  N.  W.  975,  30  L.  R.  A.  848,  58  Am. 
St.  817,  decided  in  1895,  was  an  action  to  have  an  at- 
tempted sale  of  the  water-works  plant  of  the  respon- 
dent city  to  the  appellant,  a  private  corporation,  de- 
clared void.  Before  such  attempted  sale  the  plant 
had  been  owned  and  operated  by  the  city  for  supply- 
ing its  public  wants  and  for  domestic  purposes.  The 
question  decided  in  the  negative  by  this  case  is  as  to 
whether  the  council  of  the  city  of  Huron  possesses 
the  power,  unaided  by  the  state  legislature,  to  sell  and 
transfer  the  Huron  water-works  system  to  the  appel- 
lant. In  addition  to  the  power  given  the  city  ex- 
pressly by  statute  to  construct  and  maintain  water- 
works, the  only  statutory  authority  granted  pro- 
vides, "that  the  city  of  Huron  .  .  .  shall 
have  power  to  make  all  contracts  necessary  to  the 
exercise  of  its  corporate  powers,  to  purchase,  hold, 
lease,  transfer,  and  convey  real  and  personal  property 
for  the  use  of  the  city  .  .  .  and  to  exercise  all 
the  rights  and  privileges  pertaining  to  a  municipal 
corporation."  In  the  course  of  its  convincing  opinion 
setting  aside  the  attempted  sale  as  unauthorized,  the 
court,  after  citing  and  discussing  at  length  a  number 
of  leading  authorities,  expressed  itself  as  follows: 
""Having,  as  we  think,  established  the  proposition  that 
the  water-works  of  a  city  when  constructed  and  owned 
by  the  city,  are  to  be  regarded  the  same  as  other  city 
property  held  for  public  use,  and  therefore  charged 
and  clothed  with  a  public  trust,  it  would  seem  to  fol- 
low that  such  property  can  not  be  sold  and  conveyed 
by  the  mayor  and  common  council  of  the  city  unless 
under  special  authority  conferred  upon  them  to  so  sell 

WASHINGTON.— Theis  v.  Spokane  Falls  Gaslight  Co.,  49  Wash. 
477,  95  Pac.  1074. 


409  SALE    OF    PROPERTY.  §  352 

and  convey  the  same  by  the  legislative  power  of  the 
state.  .  .  .  From  this  examination  of  the  author- 
ities we  conclude  that  there  is  no  distinction  between 
the  nature  of  water-works  property  owned  and  held 
by  the  city,  and  public  parks,  squares,  wharves,  quar- 
ries, hospitals,  cemeteries,  city  halls,  courthouses,  fire 
engines,  and  apparatus,  and  other  property  owned  and 
held  by  the  city  for  public  use.  All  such  property  is 
held  by  the  municipality  as  a  trustee  in  trust  for  the 
use  and  benefit  of  the  citizens  of  the  municipality,  and 
it  can  not  be  sold  or  disposed  of  by  the  common  coun- 
cil of  the  city,  except  under  the  authority  of  the  state 
legislature.  .  .  .  But  such  property  is  so  owned 
and  held  by  the  municipality  as  the  trustee  of  the 
citizens  of  the  municipality,  for  the  use  and  benefit  of 
such  citizens.  It  has  been  acquired  by  the  corporation 
at  the  expense  of  the  taxpayers  of  the  city,  for  their 
use  and  benefit,  and  the  law  will  not  permit  the  cor- 
poration to  divest  itself  of  the  trust,  nor  to  deprive 
the  citizens  of  their  just  rights  as  beneficiaries  in  the 
same." 

§  352.  Municipality  trustee  for  public  of  its  water 
and  light  plant. — The  case  of  Lake  County  Water  & 
Light  Co.  V.  Walsh,  i6o  Ind.  32,  65  N.  E.  530,  98  Am. 
St.  264,  decided  in  1902,  was  an  action  to  have  set 
aside  as  fraudulent  a  deed  of  conveyance  of  the  water 
and  light  plant  of  the  city  of  East  Chicago  by  said 
city  to  the  appellant,  a  private  corporation.  In  grant- 
ing the  relief  asked  for  the  court  said  in  part:  "It 
seems  clear,  upon  the  soundest  reasoning  and  from  the 
g^eat  weight  of  authority,  that  property  held  and  used 
by  a  city  for  public  purposes  is  held  in  trust  for  the 
inhabitants,  and  can  not  be  sold  or  disposed  of  unless 
the  city  is  specially  authorized  by  the  legislature  to 
make  such  sale  or  disposition  and  thereby  determine 


§£-353  PUBLIC    UTILITIES.  4IO 

the  trust.  .  .  .  The  remaining  question  is  whether 
water-works  and  an  electric  Hght  plant  constructed  or 
purchased  by  the  city  and  maintained  by  it  for  the 
dxtinguishment  of  fires,  for  domestic  purposes,  for 
lighting  the  streets,  and  for  use  in  the  houses  of  the 
inhabitants  of  the  city  are  to  be  regarded  as  property 
devoted  to  a  public  use.  .  .  .  The  right  to  fur- 
nish water  for  protection  against  fire,  to  clean  the 
streets,  to  flush  sewers,  and  for  the  supply  of  the 
ihhabitants,  and  the  right  to  light  the  streets  and 
public  places,  and  to  furnish  gas  or  electricity  to  the 
inhabitants,  are  among  the  implied  and  inherent  pow- 
efrs  of  a  municipal  corporation  for  the  protection  of  the 
lives,  health,  and  property  of  the  inhabitants  of  the 
c^ty;  and,  as  to  the  lighting,  as  a  check  on  immorality. 
"tJnquestionably  these  are  public  purposes.  .  .  . 
In  our  opinion  water-works  and  electric  light  plants 
held,  owned,  and  maintained  by  cities  .  .  .  must 
be  regarded  as  property  held  in  trust  for  a  public  use. 
Nor  do  we  think  they  lose  that  character  by  reason  of 
the  fact  that  water  and  light  are  supplied  to  the  in- 
habitants for  domestic  purposes,  and  that  rentals  and 
charges  are  paid  for  the  same." 

'  §353-  Transfer  of  property  by  lease  must  be  au- 
thorized by  statute. — In  the  case  of  New  Albany  Water- 
works V.  Louisville  Banking  Co.,  122  Fed.  776,  decided 
ib  1903,  the  court  refused  the  right  to  the  plaintifif,  a 
private  corporation,  in  the  absence  of  express  statutory 
authority,  to  lease  to  another  like  corporation  the  prop- 
erty, franchise  and  contracts  of  its  water-works  sys- 
tem, with  which  it  was  supplying  water  to  a  munici- 
pality and  its  inhabitants.  The  case  is  mentioned  in 
this  connection  for  the  reason  that  the  court  indicated 
tifat'  it  is  beyond  the  power  of  a  municipality  to 
Validate  such  a  lease  by  its  consenting  thereto.     The 


411  SALE    OF    PROPERTY.  §354 

court  said:  "The  final  contention  in  aid  of  the  lease 
rests  on  the  alleged  assent  thereto  on  the  part  of  the 
city  of  New  Albany.  .  .  .  The  corporation  is 
created  by  the  state,  and  not  by  the  municipality. 
While  the  latter  may  grant  privileges  to  the  corpora- 
tion which  are  within  their  respective  powers  de- 
rived from  the  state,  it  can  confer  no  authority  upon 
the  corporation  to  transcend  those  powers.  The  ordi- 
nance, therefore,  is  without  force  as  authority  for  the 
lease." 

§  354.  Duty  to  serve  public  can  not  be  evaded  by 
alienation. — This  court  in  the  same  year  in  the  case 
of  Cumberland  Tel.  &  T.  Co.  v.  Evansville,  127  Fed. 
187,  refused  the  right  of  such  a  corporation  to  sell  its 
property  to  another  in  the  following  emphatic  lan- 
guage :  "The  statute  under  which  the  Evansville 
Telephone  Exchange  was  incorporated  does  not  ex- 
pressly authorize  corporations  organized  under  it  to 
sell  all  their  property.  Nor  is  there  any  implied  power 
granted  to  do  this.  The  first  section  authorizes  'any 
number  of  persons  to  form  themselves  into  a  cor- 
poration for  the  purpose  of  establishing,  maintaining 
and  operating' — not  for  selling  and  disposing  of — 
'telephones,  telephone  lines  and  telephone  exchanges'; 
and  the  articles  of  association  of  the  Evansville  Tele- 
phone Exchange  were  prepared  pursuant  to  this  au- 
thority. There  is  neither  express  power  given  by  the 
statute,  nor  can  there  be  worked  out  of  it  any  implied 
power  to  do  that  which  will  make  it  impossible  for 
the  corporation  to  do  the  thing  for  which  it  was 
organized.  A  quasi  public  corporation  can  not  disable 
itself  for  the  performance  of  its  functions  by  the  sale 
and  transfer  of  all  its  property  without  legislative  au- 
thority. .  .  .  The  Evansville  Telephone  Exchange 
was  authorized  and  empowered  to  establish  and  main- 


§  355  PUBLIC    UTILITIES.  412 

tain  its  telephone  system,  not  to  sell  it;  to  accomplish 
the  object  of  its  incorporation,  not  to  defeat  it;  to 
acquire  the  means  to  enable  it  to  perform  its  duties 
to  the  public  as  a  corporation,  not  to  disable  itself  from 
performing  those  duties.  The  attempted  sale  of  all  of 
its  property  and  franchises  was  ultra  vires,  and  con- 
trary to  public  policy,  and  therefore  null  and  void." 

§  355.  Municipal  ownership  conserved  for  public 
interest. — The  case  of  Ogden  City  v.  Bear  Lake,  &c., 
Waterworks  Co.,  i6  Utah  440,  52  Pac.  697,  41  L.  R. 
A.  305,  decided  in  1898,  was  an  action  to  set  aside  a 
lease  of  the  water-works  plant  while  owned  and 
operated  by  the  plaintiff  city,  made  by  such  city  to  the 
defendant,  a  private  corporation.  In  finding  such 
lease  to  have  been  made  without  authority  and  to  be 
therefore  void,  the  court  used  the  following  language : 
"Ogden  City  was  a  public  corporation,  and  its  au- 
thority was  limited  to  such  powers  as  were  expressly 
granted  by  statute,  and  such  as  might  be  necessary 
to  those  expressly  given.  Undoubtedly,  water  dis- 
tributed to  a  city  and  its  inhabitants  is  devoted  to  a 
public  use,  and  the  entire  system,  whether  consisting 
of  reservoirs,  conduits,  pipes,  or  other  means  used  to 
accomplish  the  delivery  is  also  dedicated  to  the  same 
use.  The  control  and  management  of  property  dedi- 
cated to  the  use  of  the  people  of  a  city  is  given  for 
their  benefit,  not  for  the  individual  benefit  of  the  public 
authorities.  .  .  .  They  can  not  deprive  the  public 
of  the  benefit  of  property  rights  or  powers  affected 
with  a  public  use  by  conveying  or  leasing  it  to  others, 
unless  their  charter  specially  authorizes  it,  though 
such  other  corporation  or  person  may  undertake  to 
give  the  public  the  use  of  it  for  compensation  deemed 
reasonable.  .  .  .  When  property  whose  use  is 
devoted  to  the  public  is  conveyed  or  leased  to  private 


413  SALE    OF    PROPERTY.  §  356 

corporations,  tliough  a  contract  may  require  its  use 
to  be  given  to  the  public  for  a  reasonable  remunera- 
tion, the  public,  to  a  great  extent,  loses  its  control  over 
it,  and  any  net  income  realized  goes  into  the  hands 
and  pockets  of  private  parties.  In  fact,  such  parties 
can  not  give  the  use  of  their  property  to  the  public 
for  the  actual  cost  of  it,  and  the  actual  expense  of  the 
business,  as  in  this  case.  They  must  have  profits,  and 
it  is  to  the  interest  of  such  parties  to  make  the  profits 
or  net  income  as  large  as  public  officials  w^ill  consent 
to  make  it.  The  people  usually  get  fleeced  when  the 
city  places  its  water-works  in  the  hands  of  private 
parties.  Public-spirited  men  are  not  at  all  times  free 
from  the  undue  influence  of  self-interest.  Their  dis- 
position to  favor  the  public  is  not  equal  to  their  incli- 
nations to  favor  themselves." 

§  356.  Public  interest  and  private  gain  antago- 
nistic.— This  case  has  been  quoted  from  at  length  not 
only  for  its  clear  enunciation  of  the  principle  of  law 
at  issue  but  especially  for  its  discussion  of  the  reasons 
for  the  decision  and  for  the  practical  attitude  which 
the  court  takes  in  dealing  with  the  situation.  That 
private  gain  is  the  controlling  motive  where  such  pub- 
lic utility  services  are  rendered  by  private  capital  is 
natural  and  inevitable  and  this  court  seems  of  the  opin- 
ion that  municipal  ownership  and  operation  are  neces- 
sary to  secure  proper  service  at  reasonable  and  uni- 
form rates  to  the  public  and  the  individual  inhabitant. 
The  case  also  takes  the  position,  although  not  neces- 
sary to  the  decision,  that  since  the  public  use  of  the 
property  and  the  duty  to  the  public  are  the  grounds 
for  the  principle  of  law  laid  down,  where  the  property 
of  the  city  is  not  necessary  or  no  longer  suitable  for 
such  use,  it  may  be  disposed  of  by  the  city.  And  it 
is    submitted    this    is    a    practical    limitation    on    the 


§  357  PUBLIC    UTILITIES.  414 

general  doctrine  denying  to  the  city  the  right  by  im- 
pHcation  to  sell  or  lease  its  property  acquired  and  used 
for  public  purposes. 

§  357.  Abandoned  property  may  be  alienated  by 
municipality. — In  the  case  of  Ogden  City  v.  Water- 
works &  Irr.  Co.,  28  Utah  25,  76  Pac.  1069,  decided  in 
1904,  the  same  court  passed  directly  upon  the  question 
of  the  exception  to  the  general  principle  under  dis- 
cussion in  holding  to  be  valid  a  lease  made  by  the 
plaintiff  city  to  the  defendant  of  its  water-works  plant 
which  was  about  to  be  abandoned  by  said  city  and 
was  no  longer  capable  of  meeting  the  public  and  pri- 
vate demands  made  on  such  a  plant.  The  decision 
gives  the  authority  of  law  to  the  dictum  found  in  the 
earlier  case  referred  to  as  decided  by  this  court,  and 
is  to  be  commended  for  its  highly  practical  treatment 
of  the  situation.  After  finding  the  system  to  have 
been  insufficient  the  court  adds  that,  "there  is  evidence 
in  the  record  that  tends  to  show  that  the  system  itself 
had  about  outlived  its  usefulness.  ...  In  view  of 
the  conditions  that  existed  and  confronted  Ogden  City 
at  the  time  the  lease  was  made,  we  are  of  the  opinion 
that  the  city  council  not  only  acted  within  its  author- 
ized powers  in  authorizing  its  execution  and  after- 
wards ratifying  it,  but  that,  under  the  circumstances, 
those  powers  were  wisely  exercised,  for  it  is  apparent 
that,  after  the  city  had  decided  to  abandon  its  old 
water-works  system,  it  was  necessary  to  make  some 
disposition  of  its  water  right;  otherwise,  in  course  of 
time,  it  would  be  lost  by  nonuser." 

§  358.  Pipe  lines  on  failure  of  gas  may  be  alienated 
in  public  interest. — This  situation  as  to  the  disposition 
of  property,  owned  for  the  purpose  of  serving  the  pub- 
lic   and    having   become    wholly    unfit    for    the    further 


415  SALE    OF    PROPERTY.  §  358 

giving  of  such  service,  is  even  more  strikingly  found 
in  the  case  of  IndianapoHs  v.  Consumers'  Gas  Trust 
Co.,  144  Fed.  640,  decided  in  February,  1906.  The 
decision  of  this  case  held  valid  a  certain  option  given 
the  appellant  city  by  the  respondent  for  the  sale  "df 
its  gas  plant  with  which  it  had  supplied  the  inhabi- 
tants of  the  said  city  with  natural  gas.  This  optian 
to  purchase  had  been  given  the  city  as  a  condition  of 
the  granting  of  the  franchise  to  the  respondent  com- 
pany when  the  plant  was  originally  installed  and  the 
city  had  given  notice  according  to  its  terms  of  its  elec- 
tion to  exercise  its  rights  to  purchase  the  plant  und€r 
such  option.  At  the  time  this  action  arose  to  enfotoe 
such  sale  the  supply  of  natural  gas  had  failed,  so  that 
this  gas  plant  was  not  furnishing  gas  nor  had  it  b^en 
in  position  to  do  so  for  several  years.  To  have  held 
that  such  a  sale  was  ultra  vires  because  the  company 
owed  the  duty  of  furnishing  gas  to  the  public  would 
have  been  an  unwarranted  misapplication  of  a  w€!ll 
recognized  principle  of  law  and  a  complete  perversion 
of  the  purpose  intended  to  be  accomplished  thereby-, 
namely  the  protection  of  the  public  interests  as  againfet 
those  of  private  parties.  In  the  nature  of  thingsi'dt 
was  impossible  for  the  company  to  continue  to  supply 
the  public  so  as  to  that  purpose  the  plant  was  m^fe 
junk.  By  purchasing  the  plant  under  its  option  the 
object  of  the  city  was  to  make  possible  the  installatidn 
of  an  eflficient  artificial  gas  plant  for  the  accommoda- 
tion of  the  inhabitants  of  such  city  at  a  reasonable 
rate.  The  court  by  Grosscup,  J.,  said:  "The  thing 
enjoined  by  the  court  below  [which  is  reversed  hef^i] 
was  not  the  construction  or  operation  of  a  municif)kl 
natural  gas  plant.  The  thing  enjoined  was  the  pur- 
chase of  dead  mains  and  pipes — a  purchase  in  the 
promotion    of    a    purpose    to    construct    and    establish 


§  359  PUBLIC    UTILITIES.  416 

works  that  would  distribute  artificial  gas — just  such  a 
public  work  as  the  statutes  admittedly  allow." 

§  359-  Transfer  to  municipality  favored  in  interest 
of  public. — While  this  idle  condition  of  the  property 
was  recognized  by  the  court  and  must  have  had  a 
material,  practical  effect  upon  its  decision,  the  ground 
expressly  given  is  the  expiration  of  the  franchise  by 
the  election  of  the  city  to  purchase  the  plant  according 
to  its  option,  which  the  court  found  to  be  a  valid  con- 
dition to  the  granting  of  such  franchise.  The  court 
took  occasion  to  draw  the  distinction  between  this 
agreement  to  sell  a  public  service  plant  to  a  munici- 
pality and  agreements  to  sell  to  other  parties,  saying: 
"Examination  of  the  numerous  authorities  cited  for 
and  against  the  contention  of  ultra  vires  reveals  no 
case  involving  a  provision  of  like  character  with  this 
option  clause,  nor  one  in  reference  to  a  right  to  trans- 
fer the  corporate  property  to  a  municipality  under  any 
circumstances.  In  none  of  the  citations,  state  or  gen- 
eral, are  there  any  reasons  stated  that  seem  inconsis- 
tent with  the  proposition  that  a  corporation,  engaged 
in  a  service  of  public  utility,  may  contract  for  a  sale 
to  the  municipality  of  all  of  its  property  therein,  either 
through  a  condition  accepted  in  the  franchise  from  the 
city,  or  through  subsequent  arrangement.  The  ques- 
tion whether  municipal  ownership  is  favorable  to  the 
public  interest,  is  neither  involved  in,  nor  open  to, 
judicial  inquiry.  Assuming  that  such  ownership  is 
authorized,  and  is  contemplated  or  demanded  by  the 
municipality,  we  are  convinced  that  this  proviso, 
treated  alone  as  a  contract  of  sale  on  the  part  of  the 
gas  company,  is  not  within  the  inhibition  of  the  rule — ■ 
not  ultra  vires.  The  public  policy  which  is  mentioned 
in  the  cases  cited,  is  opposed  to  an  implication  of 
charter   power    to    turn    over   its    property   to    another 


417  SALE    OF    PROPERTY.  §360 

and  'abnegate  the  performance  of  its  duties  to  the 
pubHc,'  has  no  appHcation  to  the  transfer  to  the  public 
— the  municipahty — of  property  used  in  pubHc  ser- 
vice." The  United  States  Supreme  Court  refused  to 
reconsider  this  decision  on  a  writ  of  certiorari,  October 
29,   1906,  thereby  sustaining  it  as  rendered. 

§  360.  Municipal  option  to  purchase  provided  in 
franchise. — This  distinction  is  supported  by  the  com- 
mon observation,  made  by  this  court,  which  is  here 
recognized  and  given  the  effect  of  law,  that  the  public 
interests  in  public  utility  plants  are  so  much  more 
secure  when  controlled  by  public  than  by  private  capi- 
tal that  an  agreement  of  a  public  or  quasi  public  cor- 
poration to  sell  to  the  one  may  be  allowed,  in  the  ab- 
sence of  express  statutory  authority,  while  the  law 
refuses  to  permit  such  an  agreement  to  stand  when 
made  with  private  parties.  This  must  be  the  chief 
consideration  for  upholding  the  options  to  purchase 
such  plants,  which  are  now  so  commonly  taken  by  the 
municipality  when  granting  franchises.  And  such  a 
precaution  is  a  very  wise  one  for  the  city  to  take,  for 
it  provides  the  opportunity  for  the  municipality  at 
any  time  to  take  over  such  property  and  control  it 
absolutely  for  the  public  benefit.  And  while  experi- 
ence shows  that  this  action  is  sometimes  necessary 
the  fact  that  it  can  be  done  so  summarily  acts  as  an 
important  factor  in  forcing  public  consideration  into 
the  service  rendered  by  the  private  concern. 

§  361.  Legislative  authority  must  be  express  to 
permit  transfer. — The  Supreme  Court  of  California  in 
the  recent  case  of  South  Pasadena  v.  Pasadena  Land 
&  Water  Co.,  152  Cal.  579,  93  Pac.  490.  decided  in 
1908,  furnishes  a  terse  statement  of  the  principle  which 
is  generally  accepted  by  the  courts  that  any  corpora- 

27— Pub.  ut. 


§  362  PUBLIC    UTILITIES.  418 

tion,  whether  municipal  or  private,  engaged  in  the  fur- 
nishing of  municipal  public  utility  service  can  not  sell 
and  transfer  to  private  capital  its  property  devoted  to 
that  purpose  without  legislative  authority  and  that 
any  attempted  transfer  of  such  property  which  is  not 
so  authorized  is  void  and  of  no  effect.  This  court 
says:  "The  respondent  is  a  quasi  public  corporation, 
engaged  in  supplying  water  for  public  use.  This  is 
admitted  and  it  is  conceded  that  corporations  of  that 
character  can  not,  without  legislative  sanction,  trans- 
fer to  another  the  entire  property  devoted  to  such 
service  and  the  business  of  carrying  it  on.  This 
appears  to  be  settled  by  the  authorities." 

As  such  a  corporation  can  not  sell  its  property 
necessary  to  provide  such  service  because  the  effect 
of  doing  so  would  be  to  disable  it  from  rendering  the 
service,  it  necessarily  follows,  and  is  so  held  by  the 
courts,  that  it  can  not  transfer  or  in  any  manner  dis- 
pose of  its  franchise  rights  to  use  the  streets  and  other 
public  places  to  furnish  such  service  without  legis- 
lative authority.  This  is  decided  in  the  case  of  State 
V.  Portland  General  Electric  Co.,  52  Ore.  502,  95  Pac. 
722,  decided  in  1908,  as  follows:  "The  corporation 
can  not  absolve  itself  from  the  performance  of  its 
obligations  without  the  consent  of  the  legislature. 
.  .  .  It  may  be  considered  as  settled  that  a  corpora- 
tion can  not  lose  or  alien  any  franchise  or  any  prop- 
erty necessary  to  perform  its  obligations  and  duties 
to  the  state  without  legislative  authority." 

§  362.  Franchise  personal  to  grantee  and  not  trans- 
ferable.— That  the  franchise  rights  of  such  a  corpora- 
tion to  use  the  streets  and  highways  to  furnish  munici- 
pal public  utility  service  can  not  be  transferred  with- 
out express  legislative  authority  is  due  to  the  fact 
that  such  rights  are  special  privileges  accorded  to  the 


419  SALE    OF    PROPERTY.  §  363 

particular  grantees  receiving  them  and  are  in  that 
sense  and  for  that  reason  personal,  which  limits  their 
exercise  to  the  parties  to  whom  they  are  granted. 
This  principle  is  well  expressed  in  the  case  of  McCar- 
ter  Atty.  Gen.  v.  Vineland  Light  &  Power  Co.,  72  N. 
J.  Eq.  767,  70  Atl.  177,  decided  in  1909,  where  the  court 
enjoined  the  extension  of  gas  mains  by  the  purchaser 
of  a  gas  plant  at  a  receiver's  sale,  because  the  right  to 
make  such  extensions  and  to  operate  the  plant  was 
limited  to  the  parties  originally  receiving  the  grant 
of  this  privilege,  and  the  legislature  having  given  no 
authority  to  transfer  them,  the  purchaser  at  the  re- 
ceiver's sale  did  not  acquire  these  franchise  rights. 
In  the  course  of  its  opinion  the  court  said:  "The  rule 
must  be  considered  settled  that  no  person  or  corpora- 
tion can  acquire  a  right  to  make  a  special  or  excep- 
tional use  of  a  public  highway,  not  common  to  all  the 
citizens  of  the  state,  except  by  grant  from  the  sover- 
eign power.  We  think  the  defendant  company  had 
acquired  no  right  to  make  the  extensions  enjoined, 
because  it  had  no  grant  from  the  state.  We  have 
pointed  out  that  it  was  organized  under  the  general 
corporation  act,  and  claims  its  right  to  use  the  streets 
as  lessee  of  the  franchise  of  the  Vineland  Gaslight 
Company  acquired  by  the  latter  company  by  P.  L. 
1870,  p.  577.  Although,  technically  speaking,  fran- 
chises are  property,  they  are  property  of  a  peculiar 
character,  arising  only  from  legislative  grant,  and  are 
not  subject  to  sale  and  transfer  without  the  authority 
of  the  legislature.  We  find  no  legislative  authority  for 
the  conveyance  of  the  franchise  by  Forrum  to  Hol- 
brook,  from  the  latter  of  whom  the  defendant  claims 
title." 

§  363.     Combination   agreements   defeating  compe- 
tition  are    invalid. — Furthermore    the    courts    will    not 


§  364  PUBLIC    UTILITIES.  42O 

permit  such  a  corporation  to  disable  itself  from  serv- 
ing the  public  adequately  and  on  reasonable  terms  and 
conditions  by  combining  with  a  competing  corporation 
rendering  similar  service  for  the  natural  effect  of  such 
a  combination,  in  the  absence  of  proper  regulation  and 
control,  is  to  destroy  competition  and  enhance  the  cost 
of  the  service  or  impair  its  efficiency;  although  where 
there  is  adequate  regulation  and  control  of  the  service 
and  its  cost,  such  a  combination  can  be  justified  and 
has  been  permitted  by  the  courts,  for  the  reason  that 
a  more  comprehensive  and  systematic  service  can  be 
secured  in  this  way,  and,  in  most  cases  at  least,  at  an 
actual  reduction  of  the  operating  expenses.  The 
Supreme  Court  of  Washington  in  the  case  of  Theis 
v.  Spokane  Falls  Gaslight  Co.,  49  Wash.  477,  95  Pac. 
1074,  decided  in  1908,  in  the  course  of  its  decision  on 
this  point,  says :  "A  corporation  can  not  combine 
with  itself,  nor  can  it  combine  with  another  without 
co-operation  on  the  part  of  that  other.  By  the  enact- 
ment of  the  ordinance  giving  the  Union  company  au- 
thority to  combine  with  the  Spokane  company,  the 
city  authorized  the  latter  to  enter  and  be  a  party  to 
such  combination,  or  at  least  estopped  itself  from 
asserting  a  forfeiture  on  account  thereof.  .  .  .  We 
think  the  old  company  had  authority  to  purchase  from 
the  new  any  gas  it  deemed  necessary  or  advisable,  so 
long  as  it  did  not  pay  too  much  therefor,  and  there  is 
no  question  of  that  kind  here." 

§  364.  Contracts  fixing  rates  or  combining  com- 
petitors invalid. — The  Supreme  Court  of  the  United 
States  in  the  case  of  Gibbs  v.  Consolidated  Gas  Co.  of 
Baltimore,  130  U.  S.  396,  32  L.  ed.  979,  decided  in 
1889,  furnishes  an  excellent  statement  of  the  rule  as 
well  as  the  reason  upon  which  it  is  based  refusing 
the  right  of  municipal  public  utilities  to  combine   or. 


421  SALE    OF    PROPERTY.  §  365 

by  agreement  without  legislative  consent,  to  withdraw 
or  abandon  its  service  to  the  public.  That  such  would 
be  inimical  to  the  public  interests  is  recognized  by  the 
court,  and  for  this  reason  the  principle  denying  the 
right  by  combination  or  otherwise  to  abandon  the 
service  to  the  public  is  not  permitted  by  any  of  our 
decisions,  for  as  the  court  in  this  case  says:  "It  will 
be  perceived  that  this  was  an  agreement  for  the  aban- 
donment by  one  of  the  companies  of  the  discharge  of  its 
duties  to  the  public,  and  that  the  price  of  gas  as  fixed 
thereby  should  not  be  changed  except  that  in  case  of 
competition,  the  rate  might  be  lowered  by  one,  but  not 
below  a  certain  specified  rate,  without  the  consent  of 
the  other.  .  .  .  The  supplying  of  illuminating  gas 
is  a  business  of  a  public  nature  to  meet  a  public  neces- 
sity. It  is  not  a  business  like  that  of  an  ordinary 
corporation  engaged  in  the  manufacture  of  articles 
that  may  be  furnished  by  individual  effort.  .  .  . 
Innumerable  cases,  however,  might  be  cited  to  sustain 
the  proposition  that  combinations  among  those  en- 
gaged in  business  impressed  with  a  public  or  quasi 
public  character,  w^hich  are  manifestly  prejudicial 
to  the  public  interest,  can  not  be  upheld.  ...  It 
is  also  too  well  settled  to  admit  of  doubt  that  a  cor- 
poration can  not  disable  itself  by  contract  from  per- 
forming the  public  duties  which  it  has  undertaken, 
and  by  agreement  compel  itself  to  make  public  ac- 
commodation or  convenience  subservient  to  its  private 
interests." 

§  365.  Stock  control  of  competing  concerns  in- 
valid.— Nor  will  the  courts  permit  the  combination 
of  competing  municipal  public  utilities  to  be  brought 
about  indirectly  or  under  cover  by  the  purchase  of  a 
controlling  interest  in  the  one  by  the  other  because 
the  purpose  and  effect  of  such  a  purchase  would  be  to 


§  366  PUBLIC    UTILITIES.  422 

destroy  competition  with  the  natural  result  that  the 
public  interest  would  suffer  by  the  exaction  of  a 
higher  rate  for  the  service  rendered  or  by  the  rendi- 
tion of  less  adequate  service,  for  as  the  Supreme  Court 
of  Illinois  in  the  recent  case  of  People  ex  rel.  Fitz- 
henry  v.  Union  Gas  &  Electric  Co.,  254  111.  395,  98  N. 
E.  768,  decided  in  1912,  says:  "To  sustain  appellant's 
position  would  be,  in  effect,  to  hold  that  one  public 
service  corporation  might,  by  contract  with  a  com- 
peting public  service  corporation,  divest  the  compet- 
ing corporation  of  the  power  to  exercise  its  franchise 
and  by  tying  up  its  stock  prevent  such  competing 
corporation  from  again  engaging  in  business.  .  .  . 
It  seems  plain  that  in  seeking  to  invest  itself  not  only 
with  the  street  rights  of  but  also  the  control  over 
the  two  existing  companies,  its  object  was  to  suppress 
competition.  This  court  held,  in  Dunbar  v.  American 
Telephone  Co.,  224  111.  9,  79  N.  E.  423,  115  Am.  St. 
R.  132,  8  Am.  Cas.  57,  that  one  corporation  can  not 
own  stock  in  another  corporation,  and  an  attempt  to 
do  so,  by  purchasing  in  the  name  of  another  or  having 
the  legal  title  held  in  the  name  of  another  for  the 
benefit  of  the  purchasing  corporation,  is  contrary  to 
law  and  the  public  policy  of  this  state." 

§  366.  Forced  sales  of  such  property  also  pro- 
hibited.— These  cases,  then,  will  serve  to  show  the 
general  rule  of  law,  together  with  the  practicable 
limitation  placed  thereon  by  our  courts,  which  refuses 
to  find  power  in  such  corporations  by  implication  to 
sell  the  property  used  in  serving  the  public,  except  in 
those  cases  of  municipal  corporations  when  the  public 
interest  no  longer  necessitates  its  continued  holding. 
And  it  should  be  noted,  also,  that  the  rule  is  not 
limited  to  cases  of  voluntary  sales  but  that  such  prop- 
erty when  used  for  public  purposes  is  not  subject  to 


423  SALE    OF    PROPERTY.  §  367 

forced  sales  on  execution.  Dillon,  Mun.  Corp.,  §  991, 
5  Am.  &  Eng.  Ency.  Law,  1068,  and  cases  cited.  The 
case  of  Sun  Printing  &  Publishing  Assn.  v.  Mayor, 
152  N.  Y.  257,  46  N.  E.  499.  37  L-  R-  A-  788,  8  App. 
Div.  (N.  Y.)  230,  is  an  interesting  illustration  of  the 
principle  that  the  municipality,  when  expressly  au- 
thorized, may  lease  such  a  public  utility  as  a  rapid 
transit  system  owned  by  the  city  to  private  parties 
for  operation. 

§  367.  Right  of  alienation  expressly  given  by  stat- 
ute vaHd. — In  the  case  of  Bailey  v.  Philadelphia,  184 
Pa.  594,  39  Atl.  494,  39  L.  R.  A.  837,  63  Am.  St.  812, 
decided  in  1898,  the  Supreme  Court  of  Pennsylvania 
pretended  to  find  by  implication  the  power  in  the 
municipality  to  lease  its  gas  works  on  the  theory  that 
the  city  owned  such  property  as  a  business  corpora- 
tion, and  from  this  fact  concluded  that  the  city  is  not 
required  by  its  municipal  duty  under  the  statute  to 
supply  its  citizens  with  gas  for  lighting.  The  court, 
however,  finds  that  "the  right  of  alienation  is  given 
in  express  words  in  the  charter."  In  so  far  as  the 
actual  decision  of  the  case  goes,  in  finding  express 
statutory  authority  for  the  lease  it  is  in  full  accord 
with  the  authorities,  but  the  spirit  of  the  case  as  shown 
by  an  extended  argument  which  is  obiter  dictum  is  an 
unauthorized  attempt  to  support  the  proposition  that 
the  municipality  has  inherent  power  to  lease  or  dis- 
pose entirely  of  its  gas  plant  and  that  it  is  under  no 
duty  to  serve  the  public  with  such  a  public  utility 
beyond  its  own  pleasure.  This  doctrine,  which  the 
case  suggested,  is  not  supported  by  the  authorities 
but  is  directly  contrary  thereto,  and  its  adoption  would 
be  dangerous  to  the  public  welfare,  nor  does  it  seem 
to  have  been  followed  bv  anv  of  our  courts. 


CHAPTER  XIX. 

RIGHTS    ON    EXPIRATION    OR    FORFEITURE 
OF  FRANCHISE. 

Section. 

368.  Property  not  forfeited  with  franchise. 

369.  Right  to  retake  possession  coupled  with  property. 

370.  Practical   disposition   of  property   on   expiration   of   franchise. 

371.  Property  and  franchise  rights  may  be  forfeited  by  agreement. 

372.  Forfeiture  for  nonuser  after  reasonable  time. 

373.  Nonuser  resulting  in  forfeiture  reopens  field. 

374.  Trespasser  if  necessary  franchise  not  secured. 

375.  Franchise  rights  must  be  accepted  in  reasonable  time. 

376.  Acceptance  of  franchise  and  rendering  services  necessary. 

377.  Forfeiture  follows  failure  to  perform  if  statute  self-executing. 

378.  Forfeiture   waived   and   substantial   performance   sufficient. 

379.  Provisions   of  municipal   franchise  modified   by  agreement. 

380.  Title  to  property  not  affected  by  expiration  of  franchise. 

381.  Right  to  retake  property  necessary  to  enjoy  its  ownership. 

382.  Plant  should  not  be  dismantled  but  transferred. 

383.  Franchise  renewed  or  plant  purchased  by  municipality. 

384.  Right  to   remove   equipment   on   forfeiture. 

385.  Trespasser  on  expiration  regardless  of  investment  in  Ohio. 

386.  Impracticable  to   treat   as  trespassers   on   expiration    of   fran- 

chise. 

387.  Agreement  express  for  revocation  and  removal. 

388.  Municipality    must    purchase    or   renew    if   franchise    requires. 

§  368.  Property  not  forfeited  with  franchise. — 
When  the  special  franchise  privileges  of  occupying 
the  streets,  highways  and  other  public  places  have 
expired  or  become  forfeited,  the  municipal  public  util- 
ity is  not  by  virtue  of  that  fact  deprived  of  its  prop- 
erty nor  can  such  property  be  confiscated,  nor  does  it 
escheat  to  the  state  or  to  the  particular  municipality. 
On  the  expiration  of  such  franchise  rights  or  at  their 
forfeiture  the  property  rights  of  the  municipal  public 
424 


425  FRANCHISE EXPIRATION FORFEITURE.  §  369 

Utility  to  whom  they  were  granted  are  not  then  and 
thereby  terminated.  The  rights  of  the  municipal  pub- 
lic utility  to  its  property  have  coupled  with  them  the 
additional  right  or  privilege  of  entering  upon  the 
streets  for  the  purpose  of  taking  possession  and  re- 
moving the  property  within  such  time  after  the  termi- 
nation of  the  franchise  as  may  be  reasonably  necessary 
for  doing  so. 

§  369.  Right  to  retake  possession  coupled  with 
property. — Indeed  it  is  to  the  interest  of  the  munici- 
pality and  its  inhabitants  that  the  property  of  the 
municipal  public  utility  remain  in  position  for  a  time 
at  least  after  its  franchise  rights  terminate  for  the  pur- 
pose of  continuing  its  service  until  service  is  provided 
by  another  or  until  another  franchise  can  be  agreed  up- 
on between  the  municipality  and  the  corporation  fur- 
nishing the  service.  Naturally  the  rendering  of  the 
service  until  the  termination  of  the  franchise  requires 
the  occupation  of  the  streets  with  the  necessary  equip- 
ment during  the  entire  period  and  as  this  can  not  be 
interfered  with  nor  removed  without  interrupting  the 
service  due  the  municipality  and  its  inhabitants  until 
after  the  expiration  of  the  franchise  period,  it  is  neces- 
sary to  allow  a  reasonable  period  after  the  expiration 
of  the  franchise  within  which  such  equipment  may  be 
removed  or  another  franchise  agreement  entered  into. 

§  370.  Practical  disposition  of  property  on  expira- 
tion of  franchise. — Where  under  the  terms  of  the  fran- 
chise the  municipality  has  the  right  to  purchase  the 
property  at  a  fixed  period,  the  title  does  not  pass 
to  the  municipality  at  the  time  fixed  unless  the  city 
exercises  its  right  to  purchase  and  pays  or  tenders  the 
reasonable  value  of  the  plant  or  the  particular  amount 
if  it  has  been  fixed  and  determined  in   the   franchise. 


§371 


PUBLIC    UTILITIES. 


426 


And  in  case  the  municipality  does  not  exercise  its 
right  to  purchase  but  permits  the  municipal  public 
utility  to  continue  to  furnish  the  service,  it  can  scarcely 
be  regarded  as  a  trespasser  although  some  of  the  cases 
have  so  held.  The  expiration  of  the  franchise  termi- 
nates the  contractual  relation  created  by  it  so  that 
neither  party  can  be  compelled  without  its  consent  to 
renew  the  contract  nor  required  to  furnish  or  accept 
service  beyond  a  reasonable  time  within  which  other 
arrangements  for  service  may  be  made.  The  right  of 
the  corporation  providing  the  service  to  remove  its 
equipment  is  unquestioned  and  the  enjoyment  of  this 
right  requires  the  holding  that  it  is  coupled  with  an  in- 
terest permitting  the  owner  of  the  property  to  enter 
upon  the  streets  of  the  municipality  for  the  purpose  of 
removing  its  plant  and  equipment.  This  necessarily  re- 
sults in  an  extravagant  waste  of  property  due  to  the  ex- 
cessive cost  of  removing  the  property  as  well  as  the 
consequent  expense  of  repairing  the  streets  and  the  de- 
preciated value  of  the  property  when  removed.  As  all 
this  expense  must  be  charged  to  the  cost  of  service  by 
the  municipal  public  utility  rendering  it,  the  interest 
of  the  public  obviously  demands  that  such  expense  be 
avoided  by  the  continued  use  of  the  plant  under  a 
renewal  of  the  franchise  or  a  purchase  by  the  munici- 
pality or  other  capital. 


§  371.  Property  and  franchise  rights  may  be  for- 
feited by  agreement. — The  parties  to  the  agreement 
contained  in  the  franchise,  however,  may  by  express 
stipulation  provide  that  the  franchise  privileges  shall 
terminate  in  case  the  municipal  public  utility  service 
is  not  furnished  within  a  fixed  period  or  in  accord- 
ance with  stipulated  conditions.  The  municipality  may 
take  the  precaution  of  securing  the  performance  of 
the    service    to    be    rendered    by    such    provisions    and 


4-27  FRANCHISE EXPIRATION FORFEITURE.  §  372 

the  terms  of  some  franchise  grants  expressly  stipu- 
late that  the  property  as  well  as  the  franchise  rights 
of  the  corporation  shall  be  forfeited  to  the  municipality 
in  the  event  of  the  failure  to  render  the  service  within 
a  fixed  time  or  in  accordance  with  the  stipulated  con- 
ditions. In  the  absence,  however,  of  such  express 
stipulation  the  right  of  the  municipal  public  utility 
to  its  property  is  not  affected  by  the  expiration  or 
forfeiture  of  the  franchise  privileges  any  more  than 
the  property  of  any  corporation  is  forfeited  on  the 
expiration  of  the  term  of  its  corporate  existence.  The 
property  of  the  corporation  belongs  to  it  separate 
and  independent  of  its  special  franchise  rights  by 
which  the  municipality  grants  its  consent  to  the  fur- 
nishing of  the  service  by  the  corporation  and  to  the 
use  of  its  highways  for  that  purpose.  The  work- 
ing of  a  forfeiture  of  such  rights  in  this  connection 
as  in  cases  of  forfeiture  generally  is  not  favored  by 
our  courts  and  franchise  rights  will  not  be  forfeited 
except  in  cases  clearly  justifying  it. 

§  372.  Forfeiture  for  nonuser  after  reasonable 
time. — Where,  however,  the  municipal  public  utility 
fails  or  refuses  for  an  unreasonable  time  to  install  its 
plant  and  provide  service,  the  courts  will  not  hesitate 
to  declare  their  special  franchise  privileges  to  be  for- 
feited on  account  of  their  nonuser.  Where  the  fran- 
chise expressly  stipulates  as  a  condition  precedent  to 
its  use  and  enjoyment  that  the  municipal  public  utility 
plant  shall  be  installed  and  the  service  begun  by  a 
certain  time  or  within  a  fixed  period  after  the  granting 
of  the  franchise  rights  and  as  a  condition  precedent 
to  their  enjoyment,  the  courts  will  declare  such  rights 
to  be  forfeited  in  case  of  a  failure  on  the  part  of  the 
municipal  public  utility  to  comply  with  such  express 
stipulations    in    the    franchise,    and    on    the    request    of 


^27^  PUBLIC    UTILITIES.  428 

the  municipality  will  enjoin  any  attempt  on  the  part 
of  the  municipal  public  utility  thereafter  to  install  its 
system  and  render  service.  Such  a  holding  by  the 
courts  is  not  unreasonable  because  it  is  only  giving 
effect  to  the  stipulations  expressly  made  in  the  con- 
tract or  construing  its  terms  in  a  reasonable,  practical 
manner  in  the  interest  of  the  municipality  and  its  in- 
habitants. So  long  as  any  part  of  the  franchise  re- 
mains outstanding  it  necessarily  interferes  with,  if  it 
does  not  prevent,  the  granting  of  the  same  or  similar 
franchise  rights  to  another  corporation  through  which 
the  service  might  be  secured  in  case  it  is  not  furnished 
under  the  franchise  first  granted  which  necessitates 
the  decree  of  the  court  forfeiting  the  first  franchise 
in  the  event  its  privileges  are  not  exercised  and  the 
service  furnished  under  and  by  virtue  of  its  provi- 
sions.^ 

1  ALABAMA.— Mobile  v.  Stein,  54  Ala.  23;  Stein  v.  McGrath, 
128  Ala.  175,  30  So.  792. 

CALIFORNIA.— Los  Angeles  R.  Co.  v.  Los  Angeles,  152  Cal. 
242,  92  Pac.  490. 

FEDERAL.— Boise  City  Artesian  Hot  &  Cold  Water  Co.  v. 
Boise  City,  123  Fed.  232;  Denver  v.  New  York  Trust  Co.,  187  Fed. 
890,  229  U.  S.  123;  Laighton  v.  Carthage,  Mo.,  175  Fed.  145:  National 
Waterworks  Co.  v.  Kansas  City,  62  Fed.  853,  27  L.  R.  A.  827; 
Stewart  v.  Ashtabula,  98  Fed.  516,  107  Fed.  857;  Thompson  v. 
Schenectady  R.  Co.,  124  Fed.  274;   Pocatello  v.  Murry,  206  Fed.  72. 

ILLINOIS.— Belleville  v.  Citizens'  Horse  R.  Co.,  152  111.  171,  38 
N.  E.  584,  26  L.  R.  A.  681;  Chicago  Municipal  Gas-Light  &  Fuel  Co. 
V.  Lake,  130  111.  42,  22  N.  E.  616. 

INDIANA.— Coverdale  v.  Edwards,  155  Ind.  374,  58  N.  E.  495; 
Cumberland  Tel.  &  T.  Co.  v.  Mt.  Vernon,  176  Ind.  177,  94  N.  E.  714. 

IOWA.— Cedar  Rapids  Water  Co.  v.  Cedar  Rapids,  118  Iowa  234, 
91  N.  W.  1081,  199  U.  S.  600,  50  L.  ed.  327. 

KANSAS.— Atchison  St.  R.  Co.  v.  Nave,  38  Kans.  744,  17  Pac. 
587;  Keene  Syndicate  v.  Wichita  Gas,  &c.,  Co.,  69  Kans.  284,  76  Pac. 
834,  67  L.  R.  A.  61,  105  Am.  St.  164. 

KENTUCKY.— East  Tennessee  Tel.  Co.  v.  Russellville,  106  Ky. 
667,  21  Ky.  L.  305,  51  S.  W.  308. 

MICHIGAN.— Detroit  v.  Detroit  United  Ry.  (Mich.)  137  N.  W. 
645,  229  U.  S.  39;  Risser  v.  Hoyt,  53  Mich.  185,  18  N.  W.  611. 


429  FRANCHISE — EXPIRATION FORFEITURE.  §  373 

§  373.  Nonuser  resulting  in  forfeiture  reopens 
field. — The  Supreme  Court  of  New  York  in  the  case 
of  People  V.  Broadway  R.  Co.,  126  N.  Y.  29,  26  N.  E. 
961,  decided  in  1891,  furnishes  a  good  statement  of 
this  rule  and  indicates  the  disadvantage  under  which 
the  public  would  labor  in  the  event  the  court  had 
refused  to  declare  the  franchise  forfeited  for  nonuser. 
In  this  case  the  defendant  had  failed  for  a  period  of 
twelve  years  to  install  and  operate  any  of  its  street 
raihvay  system  and  had  defaulted  in  doing  so  for  a 
much  longer  period  as  to  a  large  part  of  its  system. 
In  declaring  the  franchise  rights  forfeited  on  account 
of  nonuser  for  such  an  unreasonable  period  in  order 
to  permit  the  municipality  to  grant  similar  franchise 
rights  to  other  parties  who  would  provide  the  neces- 
sary service,  the  court  said:  "But  even  if  it  were 
absolutely  certain  that  the  defendant  could  have  made 
no  profit  by  building  the  roads  to  the  extent  which  we 
have  above  indicated,  yet  that  is  no  answer  to  the 
proposition    that    it    is    the    duty    of    the    defendant    to 

MINNESOTA. — International  Lumber  Co.  v.  American  Sub- 
urb Co.,  119  Minn.  77,  137  N.  W.  395. 

NEW  YORK.— People  v.  Broadway  R.  Co.,  126  N.  Y.  29,  26  N.  E. 
961;  People  v.  O'Brien,  111  N.  Y.  1,  18  N.  E.  692,  2  L.  R.  A.  255,  7  Am. 
St.  684;  Wakefield  v.  Theresa,  125  N.  Y.  App.  Div.  38. 

OHIO.— Cincinnati  Inclined  Plane  R.  Co.  v.  Cincinnati,  52  Ohio 
St.  609,  44  N.  E.  327;  Hamilton,  fee.  Traction  Co.  v.  Hamilton  &  L. 
Electric  Transit  Co.,  69  Ohio  St.  402,  69  N.  E.  991;  Kinsman  Street 
R.  Co.  V.  Broadway  &  U.  Street  R.  Co.,  36  Ohio  St.  239;  Salt  Creek 
Valley  Turnpike  Co.  v.  Parks,  50  Ohio  St.  568,  35  N.  E.  304,  28  L.  R. 
A.  769;  Toledo  Consolidated  Street  R.  Co.  v.  Toledo  Electric  Street 
R.  Co.,  50  Ohio  St.  603,  36  N.  E.  312;  Wcllston  v.  Morgan,  59  Ohio 
St.  147,  52  N.  E.  127. 

UNITED  STATES.— Cleveland  Electric  R.  Co.  v.  Cleveland,  204 
U.  S.  116,  51  L,  ed.  399.  137  Fed.  Ill;  Omaha  v.  Omaha  Water  Co., 
218  U.  S.  180,  54  L.  ed.  991;  Detroit  United  Ry.  v.  Detroit,  229  U.  S. 
39,  57  L.  ed.  — ;  Denver  v.  New  York  Trust  Co.,  229  U.  S.  123,  57 
L.  ed.  — . 

WEST  VIRGINIA.— Wheeling  &  E.  G.  R.  Co.  v.  Triadelphia.  58 
W.  Va.  487,  52  S.  E.  499,  4  L.  R.  A.  (N.  S.)  321. 


§  374  PUBLIC    UTILITIES.  43O 

build  them.  It  applied  for  this  act,  and  accepted  the 
franchise,  and  thus  took  upon  itself  the  obligation  and 
burden  to  exercise  the  franchises  for  the  public  bene- 
fit. If  these  routes  could  not  presently  be  made  profit- 
able for  railroad  purposes,  it  should  not  have  applied 
for  the  act;  or,  the  act  having  been  passed,  it  should 
not  have  accepted  the  franchises.  .  ,  .  The  power 
of  the  court  to  declare  the  franchises  of  the  defendant 
forfeited  for  nonuser  is  undoubted.  .  .  .  This 
defendant  should  not  stand  in  the  streets  of  Brooklyn 
claiming  franchises  which  for  many  years  it  refused  to 
use,  and  thus  bar  out  other  railroads  which  might  be 
constructed  for  public  convenience  and  accommoda- 
tion. If  these  franchises  are  of  no  value,  it  is  not 
harmed  by  the  judgment  of  the  special  term.  If  they 
are  valuable,  and  of  growing  worth,  it  should  have 
discharged  its  duty  to  the  public  by  using  them." 

§  374.  Trespasser  if  necessary  franchise  not  se- 
cured.— That  a  municipal  public  utility  which  takes 
possession  of  the  streets  and  other  public  places  of 
the  municipality  without  the  consent  of  the  proper 
authorities  first  secured  permitting  it  to  do  so  is  a 
mere  trespasser  and  has  no  more  rights  than  a  wrong- 
doer who  takes  possession  of  the  land  of  another  with- 
out his  consent  is  the  effect  of  the  decision  in  the  case 
of  East  Tennessee  Tel.  Co.  v.  Russellville,  io6  Ky. 
667,  21  Ky.  L.  R.  305,  51  S.  W.  308,  decided  in 
1899,  where  the  court,  in  holding  that  in  such  a  case 
the  municipality  is  not  liable  for  refusing  to  grant  the 
necessary  franchise  rights  to  permit  the  municipal 
public  utility  to  install  its  plant  and  furnish  service 
where  it  had  begun  to  do  so  under  a  grant  made 
without  authority,  said:  "At  that  time  the  council- 
men  of  that  city  had  no  legislative  authority,  express 
or    implied,    which    authorized    them    to    grant    such    a 


431  FRANCHISE EXPIRATION FORFEITURE.  §375 

privilege  to  him.  He  enjoyed  no  charter  privilege 
which  conferred  upon  him  the  right  to  occupy  the 
streets  and  alleys  of  that  city  for  the  purposes  stated. 
The  date  of  the  grant  of  the  privilege  shows  that  it 
was  before  the  adoption  of  the  present  constitution. 
.  .  .  It  will  be  seen  from  this  section  of  the  con- 
stitution that  no  authority  is  vested  anywhere  to  au- 
thorize any  telephone  company  to  construct  its  line 
on  or  across  the  streets  and  alleys  or  the  public 
grounds  of  a  city  or  town,  except  with  the  consent 
of  the  proper  legislative  bodies  or  boards  of  such  city 
or  town.  No  such  authority  was  obtained  by  Clark 
or  the  telephone  company,  and  it  necessarily  follows 
that  they  had  no  right  to  enter  upon  the  streets  and 
alleys  of  the  city  for  the  purposes  stated.  To  hold 
otherwise  would  be  to  utterly  ignore  and  disregard  the 
organic  law  of  the  state." 

§  375-  Franchise  rights  must  be  accepted  in  rea- 
sonable time. — The  granting  of  a  franchise  includes 
its  acceptance  by  the  grantee  before  it  constitutes  a 
contract  and  becomes  a  property  right  or  interest 
vested  in  the  grantee.  Where  therefore  the  offer  of 
the  municipality  to  grant  the  necessary  franchise  privi- 
leges to  install  and  operate  a  municipal  public  utility 
is  not  properly  accepted  within  a  reasonable  time  by 
the  grantee,  no  contract  is  created  and  no  interest 
becomes  vested  because  the  franchise  never  became 
effective  for  it  was  never  accepted  by  the  party  to 
whom  the  municipality  offered  to  grant  it.  This  is 
the  effect  of  the  recent  decision  in  the  case  of  Cumber- 
land Tel.  &  T.  Co.  v.  Mt.  Vernon,  176  Ind.  177,  94  N. 
E.  714.  decided  in  1911,  where  the  Supreme  Court  of 
Indiana  said:  "Unless  the  ordinance  in  question  was 
accepted  by  the  American  company  before  it  executed 
the  assignment,  evidenced  either  by  express  words  or 


§  37^  PUBLIC    UTILITIES.  432 

by  some  act  or  conduct  on  its  part,  the  ordinance  was 
nothing  more  than  a  mere  proposition,  and  could  con-, 
fer  no  right  nor  impose  any  obHgation  on  the  com- 
pany. Cincinnati,  &c.  R.  Co.  v.  Clifford  (1888)  113 
Ind.  460,  15  N.  E.  524;  State  ex  rel.,  &c.  v,  Dawson 
(1861)  16  Ind.  40;  Jennings  v.  Dark  (1910)  (Ind.)  92 
N.  E.  779;  Abbott,  Municipal  Corporations,  section 
901.  .  .  .  During  the  period  from  February  20, 
1899,  to  February  5,  1906,  the  American  Telephone  & 
Telegraph  Company  never  made  any  attempt  to  con- 
struct or  operate  a  telephone  system  in  the  city,  and 
its  only  connection  with  the  ordinance,  as  shown  by 
the  record,  was  the  presence  of  one  of  its  agents  at 
the  meeting  of  the  council  which  adopted  the  ordi- 
nance, and  the  request  by  the  agent  that  it  should  be 
passed.  It  is  not  shown  that  this  agent  was  authorized 
by  the  company  to  accept  the  terms  and  conditions 
of  the  ordinance.  The  court  would  not  have  been 
warranted  in  inferring  from  the  facts  disclosed  by 
the  evidence  that  the  ordinance  was  ever  accepted." 

§  376.  Acceptance  of  franchise  and  rendering  serv- 
ice necessary. — In  refusing  to  enjoin  the  defendant 
city  from  preventing  the  plaintiff  corporation  render- 
ing the  municipal  public  utility  service  from  installing 
its  equipment  in  its  streets  because  of  its  failure  to  do 
so  within  the  time  stipulated,  the  Supreme  Court  of 
Illinois  in  the  case  of  Chicago  Municipal  Gas-Light 
&  Fuel  Co.  V.  Lake,  130  111.  42,  22  N.  E.  616,  decided 
in  1889,  in  holding  that  it  was  not  a  sufficient  perform- 
ance of  its  stipulation  to  this  effect  to  secure  an  assign- 
ment of  a  short-time  lease  from  another  municipal 
public  utility  which  gave  no  assurance  for  the  giving 
of  its  service  permanently,  said:  "The  company,  by 
this  acceptance  of  the  ordinance,  undertook  to  per- 
form a  service  for  the  public  benefit  of  the  town  and 


433  FRANCHISE EXPIRATION FORFEITURE.  ^  377 

its  inhabitants,  in  furnishing  them  with  gas  for  illumi- 
nating and  heating  purposes;  and  it  expressly  con- 
tracted to  commence  furnishing  gas  to  the  town  with- 
in one  year  from  the  date  of  the  passage  of  the  ordi- 
nance. ...  It  was  not  the  spirit  and  true  intent 
of  the  ordinance  of  March  25,  1884,  that  the  gas  com- 
pany should  get  the  assignment  of  a  short  and  merely- 
provisional  lease  of  gas  works,  and  thereby  fulfill  the 
bare  letter  of  its  contract  by  commencing  within  the 
year  to  deliver  gas  to  the  town  of  Lake,  without 
making  any  provision  for  the  continuance  of  such 
service.  It  would  be  inequitable  and  unjust,  upon  so 
uncertain  a  term  of  its  future  gas  service,  to  compel 
the  town,  against  its  will,  to  permit  appellant  to  dig  up 
and  obstruct  its  public  streets  and  highways,  and  oc- 
cupy and  use  them,  for  the  purpose  of  laying  and 
maintaining  therein  its  gas  mains  and  gas  pipes.  It 
is  settled  doctrine  that  the  courts  will  interfere  by  in- 
junction with  the  acts  of  a  municipal  corporation,  in 
respect  to  matters  which  are  by  the  law  placed  within 
the  power  and  left  to  the  discretion  of  the  corporation, 
only  in  a  case  of  clear  and  undoubted  right;  and  such 
a  case,  in  our  opinion,  is  not  shown  in  the  record  now 
before  us.  We  are  unable  to  say  that  the  decree  of 
the  circuit  court  refusing  the  injunction,  and  dis- 
missing the  bill,  was  erroneous." 

§  377.  Forfeiture  follows  failure  to  perform  if 
statute  self-executing. — That  a  judgment  of  forfeiture 
is  not  necessary  where  it  is  expressly  provided  for  in 
the  statute,  which  is  self-executing  and  which  fur- 
nishes a  complete  justification  for  the  municipality 
in  refusing  to  permit  a  municipal  public  utility  to 
install  its  equipment  after  having  failed  for  four 
years  beyond  the  stipulated  time  to  build  its  plant 
and  provide  its  service,  is  the  effect  of  the  decision  in 

28— Pub.  ut 


§  37^  PUBLIC    UTILITIES.  434 

the  case  of  Los  Angeles  R.  Co.  v.  Los  Angeles,  152 
Cal.  242,  92  Pac.  490,  decided  in  1907,  where  the  court 
said:  "One  of  the  express  conditions  contained  in 
the  ordinance  granting  the  franchise  was  the  following: 
'If  said  road  is  not  fully  completed  and  in  operation 
within  said  time,  then  this  franchise  shall  be  forfeited 
as  to  the  portion  thereof  uncompleted.'  .  .  .  The 
ordinance  provides  that  in  case  of  a  failure  to  complete 
the  work  within  the  time  limited  the  franchise  shall 
be  forfeited,  but,  if  this  provision  is  not  self-executing, 
it  is  not  in  conflict  with  a  provision  of  the  statute 
which  is  self-executing.  ...  A  judgment  declar- 
ing and  enforcing  a  forfeiture  does  nothing  more  than 
work  a  forfeiture,  and  when  a  breach  of  condition 
works  a  forfeiture,  there  is  no  office  for  a  judgment  to 
perform,  except,  perhaps,  to  supply  conclusive  evidence 
of  the  fact — evidence  which  may  in  certain  contin- 
gencies be  useful,  though  not  for  all  purposes  essen- 
tial, ...  It  follows  from  this  conclusion  that  the 
plaintiff,  having  forfeited  its  right  to  use  or  occupy 
the  street  which  it  had  left  vacant  for  four  years  after 
the  expiration  of  the  time  limited  for  the  completion 
of  its  road,  had  no  more  right  to  lay  its  track  there 
than  one  who  had  never  been  granted  a  right  of  way, 
and  the  city  was  clearly  within  its  right  in  preventing 
the  trespass.  .  .  .  The  plaintiff  was  not  in  pos- 
session. It  was  attempting  unlawfully  to  take  pos- 
session, and  the  city  was  merely  resisting  an  unlawful 
entry  upon  a  street  which  its  duty  to  the  public  re- 
quired it  to  keep  clear  of  unauthorized  obstructions." 

§  378.  Forfeiture  waived  and  substantial  perform- 
ance sufficient. — Where,  however,  the  municipality  for 
a  number  of  years  acquiesced  in  the  default  of  the 
municipal  public  utility,  which  if  taken  advantage  of 
at  the  time  could  have  been  declared  a  forfeiture   of 


435  FRANCHISE — EXPIRATION — FORFEITURE.  §  378 

its  franchise  rights,  the  municipality  is  not  entitled  to 
a  decree  of  forfeiture  after  there  has  been  a  substan- 
tial, although  tardy,  compliance  with  the  provisions  of 
the  franchise.  After  the  franchise  provisions  have 
been  substantially  complied  w^ith  and  a  large  invest- 
ment made  for  the  purpose  of  carrying  out  the  obli- 
gations imposed  by  the  franchise,  the  municipality 
can  not  then  secure  a  forfeiture  of  the  franchise  rights, 
for  as  the  Supreme  Court  of  West  Virginia  in  the  case 
of  Wheeling  &  E.  G.  R.  Co.  v.  Triadelphia,  58  W.  Va. 
487,  52  S.  E.  499,  4  L,  R.  A.  (N.  S.)  321,  decided  in 
1905,  says:  "Having  thus  determined  that  there  was, 
on  the  face  of  the  contract,  cause  for  forfeiture,  it 
remains  to  be  determined  whether  such  steps  were 
taken  by  the  council  as  to  work,  in  law,  a  forfeiture. 
.  .  .  In  August,  1901,  after  four  or  five  years  of 
acquiescence,  the  council  took  steps  to  forfeit  by  serv- 
ice of  notice.  Then  before  the  expiration  of  the  time 
allowed  there  was  a  partial  compliance  with  the  re- 
quirements of  the  notice — a  substantial  compliance 
with  its  requirements.  In  view  of  the  long  acqui- 
escense  of  the  authorities  of  the  town,  the  railway  com- 
pany may  well  have  supposed,  and  no  doubt  did  sup- 
pose, that  no  action  to  forfeit  the  franchise  would  be 
taken  under  these  circumstances.  .  .  .  Willing- 
ness and  desire  to  comply  strictly  with  all  its  cove- 
nants is  plainly  expressed  by  the  railway  company  in 
its  bill,  and  was  verbally  communicated  to  the  town 
authorities  immediately  after  the  forfeiture  was  de- 
clared, when  the  ink  on  the  repealing  ordinance  was 
hardly  dry.  As  to  the  ability  of  the  company  to  make 
full  compliance,  there  is  no  question.  Under  these 
circumstances,  is  it  equitable  and  just  to  the  com- 
pany, or  promotive  of  the'  public  interests,  to  destroy 
this  railway?  It  represents  an  investment  of  thou- 
sands of  dollars  and  affords  means  of  convenient  and 


§  379  PUBLIC    UTILITIES.  436 

rapid  travel  and  transportation  for  the  people  of  the 
town  and  the  general  public.  Why  so  great  a  punish- 
ment for  such  slight  cause?  It  is  unprecedented  so 
far  as  the  authorities  examined  disclose.  If  the  injury- 
could  not  be  remedied,  or  the  railway  company  stood 
defiant,  refusing  to  perform,  the  case  would  wear  a 
different  aspect;  but  it  does  not.  It  is  willing  to  per- 
form to  the  letter — to  pay  the  last  farthing." 

§  379.  Provisions  of  municipal  franchise  modified 
by  agreement. — That  a  part  of  the  service  which  a 
municipal  public  utility  is  rendering  may  be  abandoned 
and  the  street  in  which  such  service  is  discontinued 
vacated  by  it  with  the  consent  of  the  municipality 
follows  from  the  fact  that  the  parties  who  entered  into 
the  franchise  agreement  may  modify  its  terms  by 
mutual  agreement  without  the  consent  of  the  state, 
for  the  reason  that  the  franchise  grant  to  be  modified 
is  the  special  privilege  of  using  the  streets  of  the  mu- 
nicipality and  is  not  concerned  with  the  general  fran- 
chise rights  granted  by  the  state  permitting  it  to  exist 
as  a  corporation.  This  generally  accepted  rule  to- 
gether with  the  distinction  between  the  special  fran- 
chise rights  granted  by  the  municipality  and  the 
general  franchise  rights  granted  by  the  state  is  well 
expressed  in  the  case  of  Thompson  v.  Schenectady  R. 
Co.,  124  Fed.  274,  decided  in  1903  where  the  court 
upheld  the  right  of  the  defendant  company  to  abandon 
its  service  and  remove  its  equipment  on  a  certain 
street.  In  the  course  of  its  decision  to  this  effect, 
the  court  said:  "The  point  that  the  right  to  run  over 
a  portion  of  Washington  avenue  could  not  be  aban- 
doned without  the  consent  of  the  state  is  not  well 
taken.  Counsel  have  fallen  into  error  as  to  the  mean- 
ing of  the  word  'franchise.'  It  may  be  true  that  a 
corporation    can    not    abandon    its    franchise — can    not 


437  FRANCHISE — EXPIRATION FORFEITURE.  §  380 

commit  suicide — without  the  consent  of  its  creator, 
the  state.  But  'franchise,'  i.  e.,  the  right  to  exist  and 
perform  certain  acts,  is  a  thing  distinct  from  the  prop- 
erty rights  which  the  corporation  when  created  may- 
acquire  from  individuals.  ...  In  this  case  the 
property  owners  who  granted  rights  of  way  by  con- 
sents which  were  subsequently  mutually  abandoned 
are  seeking  to  have  such  abandonment  adhered  to. 
The  'franchise,'  the  charter  granted  by  the  state,  is 
one  thing;  the  property  rights,  including  rights  of  way 
which  the  chartered  body  may  acquire  from  private 
individuals,  is  quite  another.  These  latter  may  be 
lost  by  acts  of  the  corporation,  and  the  approval  of 
the  state  is  not  necessary." 

§  380.  Title  to  property  not  affected  by  expiration 
of  franchise. — For  the  purpose  of  determining  the 
nature  of  the  property  rights  and  the  manner  of  their 
exercise  belonging  to  the  municipal  public  utility  at 
the  termination  of  the  franchise  period  the  recent  case 
of  Cleveland  Electric  R.  Co.  v.  Cleveland,  204  U.  S. 
116,  51  L.  ed.  399,  decided  in  1907,  is  in  point  for  the 
court  restrained  the  city  of  Cleveland  from  permitting 
another  corporation  by  ordinance  from  taking  over 
the  property  of  the  plaintiff  and  operating  it  from  the 
expiration  of  the  franchise  period  upon  the  payment 
of  an  amount  to  be  agreed  upon  or  fixed  by  the  court. 
In  the  course  of  its  opinion  by  way  of  defining  the 
rights  of  the  plaintiff  company,  the  court  said:  "The 
defendant  insists  that,  upon  the  termination  of  the 
grant  to  the  Garden  street  branch,  the  rails,  polls,  and 
other  appliances  for  operating  that  road,  and  then 
remaining  on  the  various  streets,  became  the  property 
of  the  city  or  at  least  that  the  city  had  the  right  to 
take  possession  of  the  streets  and  of  the  rails,  tracks, 
etc.,  therein  existing.     We  agree  with  the  court  below 


§  381  PUBLIC    UTILITIES.  438 

in  the  opinion  that  the  title  to  the  property  remains 
in  the  railroad  company  which  had  been  operating 
the  road,  and  we  are  of  opinion  that  The  Forest  City 
Railway  Company  had  no  rights  in  the  streets,  so  far 
as  to  affect  the  right  of  the  complainant  to  its  property 
then  existing  in  such  streets." 

§  381.  Right  to  retake  property  necessary  to  en- 
joy its  ownership. — An  excellent  statement  of  the  prop- 
erty rights  as  well  as  the  relation  existing  between  the 
parties  on  the  expiration  of  the  franchise  period  is 
furnished  by  the  case  of  Laighton  v.  Carthage,  Mo., 
175  Fed.  145,  decided  in  1909,  where  the  court  recog- 
nized the  necessity  of  permitting  the  municipal  public 
utility  to  go  upon  the  streets  and  make  such  excava- 
tions as  are  necessary  to  remove  its  property.  While 
this  right  of  removal  is  necessary  to  the  proper 
enjoyment  of  its  property  rights,  its  exercise  is  neces- 
sarily attended  with  much  difficulty  and  expense  on 
account  of  which  it  is  generally  avoided  by  a  sale  of 
the  entire  municipal  public  utility  system  to  the  mu- 
nicipality or  another  corporation  or  by  a  renewal  of  the 
franchise  between  the  original  parties  to  it.  In  the 
course  of  its  decision  defining  the  property  rights  and 
the  relation  at  the  expiration  of  the  franchise,  the 
court  in  following  the  Cleveland  Electric  Ry.  Co.  case 
said:  "When  the  franchise  contract  between  the  water 
company  and  the  city  expired  by  limitation,  the  right 
of  the  company  to  operate  its  plant  and  use  the 
streets  of  the  city  therefor  ceased,  and  with  it  the 
right  of  the  city  to  demand  the  service.  The  relation 
between  them  was  contractual,  so  that  when  the  con- 
tract ended  either  was  at  liberty  to  go  its  way,  Neither 
could  compel  the  other  against  its  consent  to  do  busi- 
ness with  it.  By  consent  the  company  continued  to 
furnish  water  supply,  and  the  city  continued  to  take  it 


439  FRANCHISE EXPIRATION — FORFEITURE.  §  381 

as  theretofore.  The  law  is  well  settled  that,  under 
such  tacit  arrangement,  while  so  acting  the  water 
company  was  rendering  a  service  to  the  public,  and, 
therefore,  during  such  service  it  became  subject  and 
amenable  to  the  obligations  growing  out  of  such 
assumed  quasi  public  service,  to  the  extent  that  it 
was  required  to  supply  water  adequate,  to  its  reason- 
able capacity,  and  at  reasonable  rates,  and  to  this  ex- 
tent became  subject  to  the  jurisdiction  and  super- 
vision of  the  courts  to  enforce  such  implied  under- 
taking. .  .  .  The  right  of  the  complainant  at  the 
termination  of  the  contract  to  enter  upon  the  streets 
of  the  city  to  remove  its  plant,  without  let  or  hin- 
drance, does  not  admit  of  debate.  Cleveland  Electric 
Railway  Co.  v.  Cleveland,  204  U.  S.  116,  51  L.  ed.  399. 
.  .  .  The  right  to  enter  upon  the  streets  of  the  city 
for  the  purpose  of  excavating  and  removing  the  water 
plant,  pipes,  hydrants,  and  other  equipments,  inheres  in 
the  very  right  of  ownership  of  the  property,  as,  other- 
wise, the  right  of  ownership  could  not  be  exerted." 

A  current  decision  as  to  the  rights  of  the  parties  on 
the  expiration  of  the  franchise  which  the  court  held 
terminated  their  contractual  relation  and  the  special 
privilege  of  the  municipal  public  utility  to  the  use  of 
the  streets  with  the  result  that  the  defendant  became 
a  trespasser  is  furnished  in  the  case  of  Detroit  v.  De- 
troit United  R.  (Mich.),  137  N.  W.  645,  decided  Octo- 
ber I,  1912,  where  the  court  said:  "From  this  deter- 
mination it  does  not  follow  that  any  rights  of  owner- 
ship in  and  to  its  property  in  the  public  streets  used 
in  the  maintenance  and  operation  of  its  railway  are 
taken  from  it.  On  the  contrary,  it  is  the  settled  law 
that,  after  the  expiration  of  a  franchise  of  a  street 
railway  company,  such  property  belongs  to  it.  Cleve- 
land V.  Cleveland  Electric  Railway,  supra.  Such  own- 
ership necessarily  carries  with  it  the  right  of  removal, 


§  382  PUBLIC    UTILITIES.  44O 

and  no  arbitrary  power  is  given  to  the  complainant  or 
should  be  given  to  it  to  proceed  at  once  by  force  to 
effect  such  removal.  Defendant  is  entitled  to  and 
should  be  given  notice  to  remove  its  property  within 
a  reasonable  time." 

§  382.  Plant  should  not  be  dismantled  but  trans- 
ferred.— The  large  investment  necessary  to  the  in- 
stallation of  the  ordinary  municipal  public  utility  plant 
should  be  conserved  in  the  interest  of  the  public  and 
not  destroyed  at  the  expiration  of  the  franchise  period, 
for  otherwise  the  public  is  required  to  pay  not  only  the 
value  of  the  service  rendered,  but  is  also  obliged  to  pay 
the  value  of  the  plant  itself,  for  its  removal  at  the  ex- 
piration of  the  franchise  results  in  the  great  waste  due 
to  the  inevitable  depreciation  attending  thereon.  There- 
fore, unless  the  plant  is  disposed  of  as  installed  and 
as  a  going  concern,  the  expense  attendant  upon  its 
actual  physical  removal  is  necessarily  borne  by  the 
patrons  of  its  service  to  whom  it  is  shifted  in  fixing 
the  cost  of  the  service.  The  recent  decision  in  the 
case  of  Denver  v.  New  York  Trust  Co.,  187  Fed.  890, 
decided  in  1911,  considers  this  practical  phase  of  the 
question  in  determining  the  property  rights  of  the  mu- 
nicipal public  utility  on  the  expiration  of  its  franchise 
and  argues  in  favor  of  the  plant  being  taken  over  by 
the  party  who  is  to  render  the  service  after  the  ex- 
piration of  the  franchise,  thus  avoiding  the  necessity 
of  removing  the  equipment  and  the  consequent  loss 
resulting  therefrom.  In  the  course  of  its  opinion,  the 
court  says :  "When  a  water  company  assumes  the 
duty  of  supplying  a  rapidly  growing  city  and  its  in- 
habitants with  water  for  a  period  of  twenty  years, 
necessarily  involving  the  expenditure  of  large  sums 
of  money,  it  is  but  natural  that  some  consideration 
would  be  given  by  the  parties  to  the  status  of  the 
company  and  its  property  at  the  end  of  the  period.    A 


441  FRANCHISE EXPIRATION FORFEITURE.  §  383 

business  of  that  character  can  not  be  conducted  from 
hand  to  mouth  Hke  that  of  a  green-grocer,  but  pro- 
vision for  the  pubHc  needs  must  be  made  many  years 
in  advance  of  actual  demand,  at  least  for  an  adequate 
w^ater  supply.  There  must  be  a  large  investment 
against  future  requirements.  .  .  .  Much  of  the  in- 
vestment made  under  such  conditions  naturally  re- 
mains unreturned  at  the  end  of  the  franchise  period. 
It  would  be  a  grevious  burden  upon  the  inhabitants 
of  a  city  if  a  water  company  exacted  such  rates  as 
would  yield  a  reasonable  return  and  in  addition  thereto 
such  part  of  the  investment  as,  at  the  end  of  the  fran- 
chise term,  would  reduce  it  to  the  value  of  an  idle 
plant.  No  community  would  tolerate  such  charges, 
and  in  practice  they  are  rarely  if  ever  made.  .  .  . 
Here,  the  contract  was  that  when  the  twenty-year 
period  expired,  if  the  city  did  not  by  ordinance  grant 
the  company  a  renewal  embracing  an  obligation  on 
its  part  to  accept  hydrant  service  as  before  and  pay 
for  the  same  at  the  reduced  rate,  it  would  take  over 
the  entire  business  by  buying  the  property.  .  .  . 
Though  the  time  is  past  there  has  been  nether  renewal 
by  ordinance  nor  purchase.  .  .  .  The  case  as  pre- 
sented in  the  pleadings  and  affidavits  seems  to  be  well 
within  the  settled  principles  which  determine  the 
impairment  of  the  obligation  of  contracts  by  subse- 
quent legislation  and  the  right  to  protection  there- 
from by  appeal  to  a  court  of  equity."  Reversed  on 
different   interpretation   of  franchise   in   229  U.   S.  — . 


§  383.  Franchise  renewed  or  plant  purchased  by 
municipality. — That  the  property  of  the  municipal  pub- 
lic utility  does  not  in  any  sense  belong  to  the  munici- 
pality on  the  expiration  of  the  franchise  period  is 
decided  in  the  case  of  National  Waterworks  Co.  v. 
Kansas   City,  62   Fed.   853,  27  L.   R.  A.   827,   decided 


§  384  PUBLIC    UTILITIES.  442 

in  1894,  where  the  franchise  provided  for  the  purchase 
of  the  plant  at  the  expiration  of  the  franchise  period 
in  case  the  grant  was  not  renewed.  In  holding  that 
as  the  grant  had  not  been  renewed  at  the  expiration  of 
the  period  fixed  in  the  ordinance  and  that  in  this 
event  the  city  according  to  the  terms  of  the  franchise 
was  obhged  to  purchase  the  plant  at  its  present  "fair 
and  equitable  value,"  the  court  said:  "We  dissent  in 
toto  from  the  claim  of  the  city  that  at  the  lapse  of  the 
twenty  years  the  title  to  this  property,  with  the  right 
of  possession,  passed  absolutely  to  it,  without  any  pay- 
ment or  tender  of  payment,  leaving  only  to  the  com- 
pany the  right  to  secure  compensation  by  agreement 
or  litigation,  as  best  it  could.  .  .  .  Now,  the  famil- 
iar and  ordinary  law  of  business  transactions  is  that  he 
who  parts  with  title  receives,  at  the  time,  payment.  In 
other  words,  payment  of  price  and  transfer  of  prop- 
erty are  contemporaneous  and  concurrent  acts.  When 
it  is  affirmed  that  a  contract  made  by  a  municipality 
contemplates  that  he  whose  money  builds  and  con- 
structs, and  therefore  establishes  title  to,  property, 
shall  surrender  his  title  and  possession  without  pay- 
ment, or  even  the  amount  thereof  determined,  the 
language  compelling  such  a  construction  must  be  clear 
and  imperative.  There  is  no  such  language  in  either 
the  act  or  the  ordinance." 

§  384.     Right  to  remove   equipment  on  forfeiture. 

— Where,  however,  as  in  the  case  of  Belleville  v.  Citi- 
zens' Horse  R.  Co.,  152  111.  171,  38  N.  E.  584,  26  L. 
R.  A.  681,  decided  in  1894,  it  was  expressly  stipulated 
in  the  contract  that  if  the  grantee  of  the  franchise 
failed  to  install  its  plant  and  furnish  its  service  in  ac- 
cordance with  the  stipulations  in  the  franchise  agree- 
ment that  the  municipality  should  have  the  power  to 
revoke   the    consent    it   had    given    for   the    occupation 


443  FRANCHISE — EXPIRATION FORFEITURE.  §  384 

and  use  of  its  streets  for  the  purpose  of  installing  and 
operating  the  street  railway  by  the  defendant,  the 
default  in  the  performance  of  the  obligations  thus 
assumed  by  the  defendant  justified  the  municipality  in 
repealing  the  ordinance  granting  its  consent.  The 
passing  of  such  a  repealing  ordinance  constituted  an 
election  on  the  part  of  the  municipality  to  avoid  the 
contract  and  revoke  the  grant  of  the  special  privilege 
contained  in  the  franchise  which  had  the  eflPect  of 
terminating  the  contractual  relation  between  the  par- 
ties. In  sustaining  the  petition  of  the  city  for  the 
right  to  remove  the  equipment  of  the  defendant  com- 
pany from  the  streets  of  the  municipality  after  such 
default  on  the  part  of  the  defendant  company,  which 
the  court  held  had  the  effect  of  abrogating  its  rights 
to  use  the  streets,  and  the  passage  of  the  repealing 
ordinance  terminating  the  franchise  rights,  the  court 
in  defining  the  rights  of  the  defendant  to  its  property 
held  that  while  the  equipment  belonged  to  the  defend- 
ant company,  the  municipality  had  the  right  to  require 
its  removal  from  its  streets  although  it  could  not  for- 
feit the  property  in  doing  so,  for  as  the  court  said: 
"Of  course,  section  3  of  the  repealing  ordinance  was 
void.  The  city  had  no  authority,  without  the  judg- 
ment of  a  court,  to  forfeit  to  its  own  use  the  tracks, 
switches,  and  turnouts  of  the  railway  company.  Bald- 
win V.  Smith,  82  111.  162.  But  there  was  no  attempt  to 
enforce  it.  .  .  .  The  case  of  Pacific  R.  Co.  v. 
Leavenworth,  i  Dill.  393.  Fed.  Cas.  No.  10,649,  's  very 
like  this.  There  an  ordinance  and  contract,  special  in 
their  terms,  were  construed  to  give  the  city  a  right 
to  re-enter  and  take  possession  of  the  street,  and 
remove  the  railroad  track  on  the  failure  of  the  com- 
pany to  comply  with  the  conditions  of  the  ordinance 
granting  to  it  the  right  of  way.  Dillon,  J.,  in  dispos- 
ing of  the  case,  said:     T  refuse  the  instruction,  on  the 


§  385  PUBLIC    UTILITIES.  444 

ground  that  the  company  is  in  default,  and  the  city  is 
only  pursuing  a  remedy  which  is  given  to  it  by  the 
contract  of  the  parties.'  " 

§  385.  Trespasser  on  expiration  regardless  of  in- 
vestment in  Ohio. — The  Supreme  Court  of  Ohio  in 
the  case  of  Cincinnati  Inclined  Plane  R.  Co.  v.  Cin- 
cinnati, 52  Ohio  St.  609,  44  N.  E.  327,  decided  in  1894, 
furnishes  an  extreme  decision  to  the  effect  that  upon 
the  expiration  of  the  franchise  period  the  municipal 
public  utility  company  on  remaining  in  the  streets 
becomes  a  trespasser  whose  rights  are  in  no  way 
increased  or  changed  by  the  fact  that  it  made  a  large 
investment  in  substituting  electricity  as  its  motive 
power.  In  holding  that  there  was  no  renewal  of  the 
franchise  by  the  making  of  this  additional  investment 
because  it  was  not  properly  authorized,  the  court  said: 
"It  is  a  sufficient  answer  to  this  claim  to  say  that 
these  expenditures  were  not  authorized  by  both  boards, 
in  whom  was  vested  jurisdiction  to  make  renewals. 
But,  if  they  had  been  so  authorized,  what  amount  of 
expenditure  should  a  court  hold  was  necessary  to  con- 
stitute a  renewal?  And  how  are  we  to  determine  from 
the  amount  of  expenditures  the  time  for  which  such 
renewal  was  made — for  one  year,  or  for  twenty-five 
years?  And  suppose  a  street  railway  had  no  grant 
in  the  beginning;  what  amount  of  expenditure  would 
be  sufficient  to  give  them  an  implied  grant?  .  .  . 
The  defendant,  therefore,  during  that  period  of  time, 
was  a  mere  trespasser  upon  the  streets,  and  did  not 
occupy  them  by  virtue  of  any  contract  between  it 
and  the  city;  and  it  is  only  by  virtue  of  a  contract, 
express  or  implied,  that  it  could  be  made  liable 
for  license  fees."  It  will  be  noted,  however,  that  in 
face  of  the  court's  holding  the  municipal  public  utility 
to  be  a  trespasser,  it  provided  that  the  decree  enjoin- 


445  FRANCHISE EXPIRATION FORFEITURE.  §  386 

ing  its  further  use  of  the  streets  in  the  operation  of  its 
plant  should  not  be  effective  until  the  expiration  of  a 
six  months'  period  within  which  it  might  apply  to  the 
municipality  for  a  new  grant  permitting  it  to  main- 
tain and  operate  its  plant. 

§  386.  Impracticable  to  treat  as  trespassers  on  ex- 
piration of  franchise. — The  leading  case  on  this  sub- 
ject which  seems  fairly  to  represent  the  current  au- 
thority is  that  of  Cedar  Rapids  Water  Co.  v.  Cedar 
Rapids,  118  Iowa,  234,  91  N.  W.  1081,  199  U.  S.  600, 
50  L,  ed.  327,  decided  in  1902,  in  which  the  duration 
of  the  franchise  was  limited  expressly  to  the  period 
of  twenty-five  years  in  accordance  with  the  statutory 
provision  limiting  the  power  of  the  municipality  to 
grant  such  a  franchise.  In  the  course  of  its  opinion 
holding  that  "the  money  and  labor  expended  in  con- 
structing, maintaining,  and  operating  the  works  must 
be  held  to  have  been  expended  with  reference  to  the 
term  for  which  it  held  a  valid  grant,"  the  court  said: 
"Neither  can  there  be  any  such  acquiescence  or  waiver 
by  the  city  as  will  prevent  or  estop  it  from  denying 
the  validity  of  an  act  beyond  the  scope  of  its  munici- 
pal powers.  A  different  rule  sometimes  obtains  when 
the  power  to  contract  exists,  but  has  been  defectively 
or  irregularly  executed;  but,  if  the  authority  to  do 
the  act  or  make  the  contract  is  expressly  withheld  or 
denied  by  law,  that  fact  may  always  be  set  up  as  a 
defense  to  an  action  brought  thereon."  After  deciding 
that  the  duration  of  the  franchise  was  limited  to  the 
period  expressly  stipulated  by  its  terms  and  could  not 
be  prolonged  by  the  acquiescence  or  waiver  of  the 
municipality,  the  court  then  proceeds  to  determine  the 
relation  of  the  parties  to  each  other  and  the  nature  of 
the  property  rights  of  the  municipal  public  utility.  On 
this  point  the  court  decides  that  on  the  termination  of 


§  387  PUBLIC    UTILITIES.  446 

the  franchise  period  the  municipal  public  utility  does 
not  become  a  trespasser  which  is  a  reasonable  and 
practically  a  necessary  limitation  on  the  doctrine  of 
the  Cincinnati  Inclined  Plane  Ry.  Co.  case,  for  as  the 
court  says :  "It  had  been  engaged  in  the  performance 
of  a  work  of  public  utility.  That  service  was  of  a  na- 
ture which,  of  necessity,  required  the  occupation  of 
the  streets  with  pipes  buried  in  the  soil,  with  connec- 
tions therefrom  of  more  or  less  permanent  character 
to  the  buildings  and  premises  of  patrons.  These  im- 
provements could  not  be  removed,  nor  to  any  extent 
interfered  with,  during  the  term  of  the  franchise,  with- 
out interrupting  the  service  the  plaintiff  was  bound  to 
render;  and  it  must  be  presumed  it  was  contemplated 
by  the  parties  that  the  company  should  remain  in  pos- 
session such  reasonable  length  of  time  after  the  expi- 
ration of  the  term  as  might  be  necessary  to  negotiate 
an  extension  or  renewal  of  the  franchise,  or,  in  default 
thereof,  to  close  out  its  business  without  unnecessary 
sacrifice.  Moreover,  the  city,  by  continued  acceptance 
of  the  water  service,  and  by  assuming  to  regulate  the 
rates  thereof,  gives  implied  consent  to  the  present 
possession  of  the  streets  and  operation  of  the  works 
until  such  time  as  it  shall  by  reasonable  notice  see  fit 
to  terminate  the  plaintiff's  tenure  of  the  privilege." 

§  387.  Agreement  express  for  revocation  and  re- 
moval.— Where,  however,  the  franchise  expressly  stip- 
ulates that  the  municipality  shall  have  the  right  to  re- 
voke the  grant  of  the  special  privilege  and  also  require 
the  removal  of  the  equipment  from  its  streets  under 
certain  conditions  expressly  made  in  the  franchise,  the 
municipality  may  exercise  such  rights  and  remove  such 
equipment,  for  as  the  court  in  the  case  of  Coverdale 
v.  Edwards,  155  Ind.  374,  58  N.  E.  495,  decided  in 
1900.  says:     "The  control  of  streets,  as  well  as  of  all 


( 


447  FRANCHISE — EXPIRATION — FORFEITURE.  §  388 

Other  public  highways,  is  primarily  in  the  legislature. 
But  the  legislature  has  delegated  to  municipalities  the 
exclusive  control  of  their  streets  and  alleys.  .  .  . 
That  license  [of  appellee]  contained  this  provision: 
'The  said  council  hereby  reserve  the  right  to  revoke 
this  grant,  and  demand  that  the  poles  be  removed,  and 
remove  the  same  if  necessary'.  The  language  is  clear 
and  the  meaning  unmistakable.  The  grant  was  a  bare 
license,  revocable  without  cause  at  the  will  of  the 
council.  If  the  licensee,  at  the  revocation  of  the  grant, 
should  not  remove  the  poles  on  demand,  the  council 
might  cause  their  removal." 

§  388.  Municipality  must  purchase  or  renew  if 
franchise  requires. — The  Supreme  Court  of  Alabama, 
as  early  as  1875,  i"  ^he  case  of  Mobile  v.  Stein,  54  Ala. 
23,  in  defining  the  nature  and  extent  of  the  property 
rights  of  the  owner  of  a  municipal  public  utility  on  the 
expiration  of  its  franchise  said:  "No  one  can  doubt 
that  it  belongs  to  Stein,  the  appellee,  and  that  the 
city  of  Mobile  can  acquire  it  only  by  a  purchase  ac- 
cording to  the  terms  of  the  agreement  and  charter. 
The  fact  that  the  grant  is  for  a  term  of  years 
only,  and  after  that  may  be  terminated  by  the  purchase 
of  the  city,  does  not  afTect  the  question  under  consid- 
eration. Most  grants  of  privileges  from  a  political 
body  are  for  a  limited  period." 

The  recent  case  of  Wakefield  v.  Theresa,  125  N.  Y. 
App.  Div.  38,  decided  in  1908,  in  sustaining  an  injunc- 
tion restraining  the  defendant  city  from  removing  or 
requiring  the  plaintiff,  operating  a  municipal  public 
utility  plant,  to  remove  its  wires,  poles,  and  other 
electrical  appliances  used  by  it  to  furnish  electric  light- 
ing in  the  defendant  city  at  the  expiration  of  the  orig- 
inal franchise  period  for  the  reason  that  the  munici- 
pality  desired    to   install    its   own   plant,    the    court,    in 


§  388  PUBLIC    UTILITIES.  448 

holding  that  it  must  either  purchase  the  plant  of  the 
plaintiff  or  renew  its  franchise  as  contemplated  by  the 
parties  in  the  original  grant,  said :  "In  reliance  on 
the  contract  the  plaintiffs  and  their  predecessors  in 
interest  expended  money  in  erecting,  extending  and 
operating  the  plant,  and  the  privilege  granted  to  use 
the  streets  became  a  valuable  property  right  of  which 
the  owners  can  not  be  deprived,  unless  there  has  been 
a  forfeiture  on  their  part,  or  unless  the  plant  has  be- 
come a  nuisance.  (People  v.  O'Brien,  in  N.  Y.  i; 
Ingersoll  v.  Nassau  Electric  R.  R.  Co.,  157  N.  Y. 
453.)  .  .  .  The  contract  contemplated  the  extension 
of  the  franchise  beyond  the  five-year  period,  unless  the 
municipality  elected  to  purchase  the  appliances.  ,  .  . 
The  real  animus  of  the  attempt  to  remove  the  plain- 
tiffs' plant  apparently  is  to  get  rid  of  a  competitor  to 
the  new  municipal  lighting  system.  It  may  be  desira- 
ble for  the  new  plant  to  have  all  the  business  of  the 
village,  yet  the  plaintiffs  are  in  the  streets  by  warrant 
of  the  village  authorities  and  have  been  many  years 
operating  their  plant.  The  intention  of  the  defendant 
to  destroy  their  property  unless  removed  within  thirty 
days  in  order  to  be  justified  must  be  founded  upon  a 
manifest  disregard  of  the  agreement  in  important  par- 
ticulars, and  the  evidence  presented  does  not  call  for 
so  drastic  and  summary  a  remedy." 


I 


CHAPTER  XX. 

STREET  AND  HIGHWAY  PRIVILEGES  OF 
MUNICIPAL  PUBLIC   UTILITIES. 

Section. 

389.  The  street  the  key  to  regulation. 

390.  Streets  for  use  and  benefit  of  public. 

391.  Duty  and  opportunity  of  municipal  oflBcers  to  conserve  public 

interest. 

392.  Control  of  streets  delegated  to  municipality. 

393.  Municipal  consent  to  use  of  streets  conditioned  on  service. 

394.  Power  delegated  to  municipality  legislative. 

395.  All  rights  subject  to  exercise  of  police  power. 

396.  Equipment  in  streets  subject  to  removal  or  change. 

397.  Street  privileges  and  police  power  defined. 

398.  Public  control  of  streets  and  franchises  complete. 

399.  Municipal  control  of  streets  delegated  by  state. 

400.  Power  mu3t  be  expressly  or  clearly  delegated. 

401.  Delegated  power  may  be  revoked  or  modified  by  state. 

402.  Streets  dedicated  in  trust  for  benefit  of  public. 

403.  Title  to  street  in  municipality  trustee  for  public. 

404.  Municipal  consent  condition  precedent. 

405.  No  exclusive  use  unless  expressly  provided. 

406.  No  power  to  alienate  or  obstruct  streets  implied. 

407.  Telephone  and  telegraph  not  limited  by  local  control. 

408.  Municipal   control   limited   to   municipality. 

409.  Power  to  grant  perpetual  franchise  not  implied. 

410.  Change  of  street  grade  requiring  relocation  of  pipes  valid. 

411.  Sewer  systems  paramount  to  public  utility  pipes. 

412.  Arbitrary  exercise  of  police  power  not  sustained. 

413.  Municipality    can    not    barter    away    right    to    exercise    police 

power. 

§  389.  The  street  the  key  to  regulation. — The  mu- 
nicipal public  utility  must  have  the  use  of  the  streets 
and  other  highways,  which  accordingly  constitute  the 
key  or  tangible  means  by  which  to  regulate  and  con- 
trol   the    service    furnished    by    the    municipal    public 

29— Pub.  ut.  449 


§  390  PUBLIC    UTILITIES.  45O 

Utility.  As  the  occupation  and  use  of  the  streets  and 
highways  is  essential  in  the  furnishing  of  municipal 
public  utility  service,  the  terms  and  conditions  upon 
which  the  privilege  of  such  use  and  occupation  are 
afforded  can  stipulate  and  determine  the  nature,  ex- 
tent and  cost  of  the  service  to  the  public. 

§  390.     Streets  for  use  and  benefit  of  public. — The 

control  of  the  streets  and  highways  is  in  the  state  in 
trust  for  the  public  for  whose  use  and  convenience 
they  are  dedicated  as  a  means  of  transportation  and 
communication,  thereby  affording  to  the  public  the 
means  by  which  they  may  go  from  place  to  place, 
communicate  with  each  other  and  enjoy  such  other 
conveniences  as  the  various  kinds  of  service  provided 
by  municipal  public  utilities  afford.  As  the  streets  and 
highways  are  dedicated  exclusively  for  the  use  and 
convenience  of  the  public  generally,  it  follows  that  the 
legislature  acting  for  the  state,  or  any  municipal 
agency  to  which  this  power  may  have  been  delegated, 
should  make  no  grant  which  will  materially  interfere 
with  the  uses  for  which  the  streets  and  highways  are 
dedicated. 

§  391.  Duty  and  opportunity  of  municipal  officers 
to  conserve  public  interest. — The  interest  of  the  public 
is  paramount  and  the  duty  of  the  legislature  or  its  duly 
authorized  agent  in  granting  the  various  special  fran- 
chise privileges  necessary  to  the  installation  and  opera- 
tion of  the  different  municipal  public  utilities  is  pri- 
marily to  the  public.  The  state  or  the  municipality 
acting  for  it  has  not  only  the  opportunity,  but  the 
tluty,  to  make  all  such  grants  in  the  interest  of  the 
public  and  for  its  benefit  and  advantage.  The  fact  that 
the  granting  of  such  special  franchise  privileges  be- 
comes a  contract  on  their  acceptance  by  the  particular 


451  STREETS    AND    HIGHWAYS.  §39-2 

municipal  public  utility  to  which  they  are  granted 
makes  it  essential  that  the  proper  regulation  and  con- 
trol of  the  service  to  be  rendered  to  the  public  shall 
be  provided  for  as  a  condition  of  the  grant  itself.  The 
means  of  control  thus  afforded  are  as  adequate  as  they 
are  convenient  of  exercise  to  secure  and  protect  the 
interests  of  the  public  absolutely  and  for  all  time.  Un- 
less, however,  such  control  is  provided  for  at  the  time 
and  as  a  condition  of  the  granting  of  the  special  privi- 
lege of  using  the  streets  and  highways,  the  most  con- 
venient if  not  the  only  adequate  method  of  securing 
such  control  for  the  time  being  at  least  is  dissipated 
and  the  welfare  of  the  public  during  the  life  of  the 
grant  is  thereby  practically  if  not  entirely  lost  and 
destroyed. 

§  392.     Control  of  streets  delegated  to  municipality. 

— As  the  control  of  all  highways,  including  streets,  is 
exercised  primarily  by  the  state  through  its  legislature 
and  secondarily  in  part  or  entirely  by  municipal  cor- 
porations, the  municipality  itself,  having  been  created 
by  the  state,  has  only  such  power  of  control  over  its 
streets  as  has  been  delegated  to  it  as  a  creature  and 
an  agent  of  the  state.  The  municipality,  however, 
generally  has  delegated  to  it  very  extensive  if  not 
practically  absolute  control  over  its  streets  and  is 
accordingly  the  agency  whose  duty  it  is  to  conserve 
and  protect  the  interest  of  the  public  by  proper  regu- 
lation and  control  of  the  use  of  its  streets  by  municipal 
public  utilities. 

§  393.  Municipal  consent  to  use  of  streets  condi- 
tioned on  service. — The  granting  to  the  municipal  pub- 
lic utility  of  the  special  franchise  rights  to  the  use  of 
the  streets  affords  the  proper  occasion  for  regulating 
the    municipal    public    utility    service    to    be    rendered. 


§  394  PUBLIC    UTILITIES.  452 

Upon  the  municipality  therefore  primarily  rests  the 
obligations  to  the  pubHc  of  maintaining  the  streets  for 
the  use  of  the  public  in  the  condition  which  best  serves 
the  interest  of  the  public.  The  municipal  corporation 
is  therefore  constituted  the  trustee  of  the  people  gen- 
erally for  this  purpose,  and  whether  the  title  to  the 
street  be  in  the  municipality  as  trustee  for  the  people 
or  in  the  abutting  property  owner,  in  either  event  the 
public  is  the  beneficiary  and  is  entitled  absolutely  to 
first  consideration  in  the  regulation  of  the  use  of  the 
street.  While,  however,  the  primary  use  of  the  street 
is  for  the  transportation  and  communication  of  the 
public,  as  has  been  shown  in  a  former  chapter,  the 
rights  of  the  abutting  property  owner  entitles  him  to 
compensation  whenever  the  street  is  subjected  to  ad- 
ditional servitudes. 

§  394.     Power  delegated  to  municipality  legislative. 

— The  power  delegated  to  the  municipality  to  control 
and  regulate  the  use  of  its  streets  is  legislative  and 
political  in  its  nature  and  must  not  be  limited  so  as 
to  prevent  its  use  for  the  best  interests  of  the  general 
public  in  accordance  with  the  requirements  of  future 
conditions.  The  statutory  authority  vesting  this  power 
of  control  in  the  municipality  determines  the  extent 
to  which  it  may  by  contract  or  otherwise  authorize  a 
necessary  use  of  the  street  by  the  municipal  public 
utility  which  may  to  this  degree  interfere  with  its  use 
by  the  public  for  travel.  Any  material  permanent  in- 
terference with  the  uses  for  which  the  street  is  dedi- 
cated, however,  would  be  unauthorized  and  invalid, 
although  expressly  granted  by  the  municipality,  and 
in  some  instances,  even  by  the  state  itself. 

§  395.     All  rights  subject  to  exercise  of  police  power. 

— While    the    municipality    may    exercise    the    power 


I 

I 

4 


453  STREETS    AND    HIGHWAYS.  §  396 

vested  in  it  to  attach  such  conditions  and  restrictions 
to  its  grants  of  special  franchise  privileges  for  the  use 
and  benefit  of  municipal  public  utilities  as  seem  nec- 
essary and  for  the  best  interests  of  the  municipality 
within  the  statutory  authoriJ:y,  neither  the  municipality 
nor  the  state  may  surrender  the  control  of  the  streets 
necessary  to  the  proper  exercise  of  the  police  power. 
All  franchise  rights  and  special  privileges,  including 
vested  interests  and  contract  rights  which  are  pro- 
tected from  impairment  by  the  constitution  are  granted 
and  held  subject  to  the  proper  exercise  of  the  police 
power  by  the  state  or  the  municipality  in  all  cases  re- 
quiring its  exercise  in  the  interest  of  the  public  health 
and  the  general  welfare.  Indeed,  the  rule  is  unques- 
tioned and  of  general  application  that  the  reasonable 
and  necessary  exercise  of  the  police  power  can  not  be 
surrendered  or  abridged  by  contract  at  the  hands  of 
the  municipality  or  even  the  state  itself.  The  exercise 
of  this  right  being  a  governmental  function  concerned 
with  the  public  health,  peace,  and  general  welfare  can 
not  be  alienated  or  delegated,  and  all  special  franchise 
rights  to  the  use  of  the  streets  are  subject  to  the  rea- 
sonable and  necessary  exercise  of  the  police  power  as 
applied  and  enforced  by  statutory  enactment  or  mu- 
nicipal ordinance  authorized  by  statute. 

§  396.  Equipment  in  streets  subject  to  removal  or 
change. — As  one  of  the  chief  uses  of  the  streets  is 
for  public  travel,  the  city  in  conserving  this  use  for 
the  general  public  may  require  municipal  public  util- 
ities having  special  franchises  to  remove  their  equip- 
ment and  readjust  their  appliances  whenever  this  is 
required  by  the  municipality,  making  necessary  im- 
provements in  a  reasonable  manner,  such  as  changing 
the  grade  of  its  streets  or  installing  a  sewer  system 
or  effecting  any  other  improvement  in  the  interests  of 


§  397  PUBLIC    UTILITIES.  454 

the  general  welfare  and  the  public  health.  The  nature 
and  extent  of  the  police  power,  however,  in  its  very- 
nature  can  only  be  fixed  and  defined  in  a  general  way 
except  as  the  particular  question  is  disposed  of  by  the 
case  in  which  it  arises.  The  municipality,  however, 
in  the  exercise  of  this  power  may  not  arbitrarily  inter- 
fere with  the  property  rights  of  the  municipal  public 
utility  by  unreasonably  requiring  the  absolute  removal 
or  relocation  of  its  equipment  where  the  benefit  to  be 
derived  would  not  justify  the  cost  and  inconvenience 
of  the  change  in  location  or  the  complete  removal  of 
the  equipment. 

§  397.     Street  privileges  and  police  power  defined. 

— In  order  to  determine  the  extent  of  the  police  power 
belonging  to  the  municipality  and  the  cases  in  which 
its  exercise  is  justified,  a  number  of  decisions  are  con- 
sidered later  on  in  this  discussion.  In  the  first  in- 
stance, however,  the  larger  and  more  fundamental 
question  of  the  control  of  the  streets  vested  in  the 
state  and  the  municipality  respectively,  and  the  man- 
ner in  which  this  control  may  be  exercised,  and  the 
purposes  for  which  it  may  be  employed  in  the  interest 
of  the  public  will  be  illustrated  and  explained  by  ref- 
erence to  the  decisions  concerned  with  this  question 
in  its  several  aspects.^ 

1  ALABAMA.— Birmingham  &  Pratt  Mines  St.  R.  Co.  v.  Birming- 
ham St.  R.  Co.,  79  Ala.  465,  58  Am.  Rep.  615;  Gadsden  v.  Mitchell, 
145  Ala.  137,  40  So.  557,  6  L.  R.  A.  (N.  S.)  781;  Montgomery  v.  Capi- 
tal City  Water  Co.,  92  Ala.  361,  9  So.  339. 

ARKANSAS.— Little  Rock  v.  Citizens'  St.  R.  Co.,  56  Aik.  28, 
19  S.  W.  17. 

CALIFORNIA.— South  Pasadena  v.  Los  Angeles  Terminal  R. 
Co.,  109  Cal.  315,  41  Pac.  1093;  Ex  parte  Russell.  163  Cal.  668.  126 
Pac.  875. 

FEDERAL.— Clapp  v.  Spokane,  53  Fed.  515;  Grand  Rapids  E. 
L.  &  P.  Co.  V.  Grand  Rapids  E.  E.,  &c.,  Co.,  33  Fed.  659;  Levis  v. 
Newton,  75  Fed.  884;  Logansport  R.  Co.  v.  Logansport,  114  Fed.  688, 
192  U.  S.  604,  48  L.  ed.  504:  Morristown  v.  East  Tenn.  Tel.  Co.,  115 


455  STREETS    AND    HIGHWAYS.  §  398 

§  398.  Public  control  of  streets  and  franchises  com- 
plete.— The  case  of  Grand  Rapids  E.  L.  &  P.  Co.  v. 
Grand  Rapids  E.  E.,  L.,  &c.,  Co.,  33  Fed.  659,  decided 

Fed.  304;  National  Water- Works  Co.  v.  Kansas,  2S  Fed.  921;  Pikes 
Peak  Power  Co.  v.  Colorado  Springs,  105  Fed.  1;  Hoffman  v. 
Mitchell,  201  Fed.  506. 

FLORIDA.— Anderson  v.  Fuller,  51  Fla.  380,  41  So.  684,  6  L.  R. 
A.  (N.  S.)  1026;  State  v.  Jacksonville  St.  R.  Co.,  29  Fla.  590,  10  So. 
590. 

GEORGIA.— Macon  Consol.  St.  R.  Co.  v.  Macon,  112  Ga.  782,  38 
S.  E.  60. 

ILLINOIS.— McWethy  v.  Aurora  Electric  Light  &  Power  Co., 
202  111.  218,  67  N.  E.  9;  People  ex  rel.  Chicago  v.  Chicago  Tel.  Co., 
220  111.  238,  77  N.  E.  245;  Smith  v.  McDowell,  148  111.  51,  35  N.  E. 
141,  22  L.  R.  A.  393. 

INDIANA.— Coburn  v.  New  Tel.  Co.,  156  Ind.  90,  59  N.  E.  324, 
52  L.  R.  A.  671,  Eichels  v.  Evansville  St.  R.  Co.,  78  Ind.  261,  41 
Am.  Rep.  561;  Newcastle  v.  Lake  Erie  &  W.  R.  Co.,  155  Ind.  18,  57 
N.  E.  516. 

IOWA.— Des  Moines  City  R.  Co.  v.  Des  Moines,  90  Iowa  770, 
58  N.  W.  906,  26  L.  R.  A.  767;  Stanley  v.  Davenport,  54  Iowa  463,  2 
N.  W.  1064,  37  Am.  Rep.  216. 

KANSAS.— Atchison  St.  R.  Co.  v.  Nave,  38  Kans.  744,  17  Pac. 
587;  Wyandotte  v.  Corrigan,  35  Kans.  21,  10  Pac.  99. 

KENTUCKY.— East  Tennessee  Tel.  Co.  v.  Russelville,  106  Ky. 
667,  21  Ky.  L.  305,  51  S.  W.  308;  Louisville  City  R.  Co.  v.  Louisville, 
8  Bush  415. 

LOUISIANA.— New  Orleans  City  &  L.  R.  Co.  v.  New  Orleans,  44 
La.  Ann.  728,  11  So.  78;  Shreveport  Traction  Co.  v.  Kansas  City, 
&c.,  R.  Co.,  119  La.  759,  44  So.  457. 

MAINE.— Rockland  Water  Co.  v.  Rockland,  83  Maine  267,  22 
Atl.  166. 

MARYLAND.— Kirby  v.  Citizens'  R.  Co.,  48  Md.  168,  30  Am. 
Rep.  455. 

MASSACHUSETTS.— Jamaica  Pond  Aqueduct  Co.  v.  Brookline. 
121  Mass.  5;  New  England  Tel.  &  T.  Co.  v.  Boston  Terminal  Co., 
182  Mass.  397,  65  N.  E.  835. 

MICHIGAN.— Mclllhinney  v.  Trenton,  148  Mich.  380,  111  N.  W. 
1083;  Monroe  v.  Detroit,  M.  &  T.  Short  Line  R.  Co..  143  Mich.  315. 
106  N.  W.  704. 

MINNESOTA.— Cater  v.  Northwestern  Tel.  Exch.  Co.,  60  Minn. 
539,  63  N.  W.  Ill,  28  L.  R.  A.  310,  51  Am.  St.  543;  Stillwater  Water 
Co.  V.  Stillwater.  50  Minn.  498,  52  N.  W.  893. 

MISSOURI —National  Waterworks  Co.  v.  Kansas  City.  20  Mo. 
App.  237;  State  ex  rel.  St.  Louis  Underground  Service  Co.  v.  Murphy, 
134  Mo.  548,  31  S.  W.  784,  34  L.  R.  A.  369,  56  Am.  St.  515. 


§  398  PUBLIC    UTILITIES.  456 

in  1888,  furnishes  a  clear  and  comprehensive  state- 
ment to  the  effect  that  primarily  the  control  of  all 
streets  and  highways  belongs  absolutely  to  the  state 
which  holds  it  in  trust  for  the  use  and  benefit  of  the 


MONTANA.— Herslifield  v.  Rocky  Mountain  Bell  Tel.  Co.,  12 
Mont.  102,  29  Pac.  883. 

NEW  JERSEY.— State;  Trenton  Horse  R.  Co.  v.  Trenton,  53  N. 
J.  L.  132,  20  Atl.  1076,  11  L.  R.  A.  410;  Water  Comrs.  v.  Hudson, 
13  N.  J.  Eq.  420. 

NEW  YORK.— American  Rapid  Tel.  Co.  v.  Hess,  125  N.  Y.  641, 
26  N.  E.  919,  13  L.  R.  A.  454,  21  Am.  St.  764;  Beekman  v.  Third  Ave. 
R.  Co.,  153  N.  Y.  144,  47  N.  E.  277;  Deering,  In  re,  93  N.  Y.  361; 
Milhau  V.  Sharp,  17  Barb.  435,  28  Barb,  228,  9  How.  Pr.  102;  People 
V.  Barnard,  110  N.  Y.  548,  18  N.  E.  354;  Phoenix  v.  Gannon,  195  N. 
Y.  471,  88  N.  E.  1066. 

NORTH  CAROLINA.— Elizabeth  City  v.  Banks,  150  N.  Car. 
407,  64  S.  E.  189. 

OHIO.— Columbus  Gaslight  &  Coke  Co.  v.  Columbus,  50  Ohio  St. 
65,  33  N.  E.  292,  19  L.  R.  A.  510,  40  Am.  St.  648. 

PENNSYLVANIA.— Frankford,  &c.,  R.  Co.  v.  Philadelphia,  58 
Pa.  119,  98  Am.  Dec.  242;  Monongahela  City  v.  Monongahela  Electric 
Light  Co.,  3  Pa.  Dist.  R.  63;  Scranton  Gas  &  W.  Co.  v.  Scranton. 
214  Pa.  586,  64  Atl.  84,  6  L.  R.  A.   (N.  S.)  1033. 

SOUTH  CAROLINA.— Charleston  Consol.  Ry.  &  Light  Co.  v. 
Charleston,  92  S.  Car.  127,  75  S.  E.  390. 

TEXAS. — San  Antonio  v.  San  Antonio  St.  R.  Co.,  15  Tex.  Civ. 
App.  1,  39  S.  W.  136;  Texarkana  v.  Southwestern  Tel.  &  T.  Co.. 
48  Texas  Civ.  App.  16,  106  S.  W.  915. 

UNITED  STATES.— Blair  v.  Chicago,  201  U.  S.  400,  50  L.  ed.  801; 
Detroit  v.  Detroit  Citizens'  St.  R.  Co.,  184  U.  S.  368,  46  L.  ed.  592; 
Detroit  Citizens'  St.  R.  Co.  v.  Detroit  R.,  171  U.  S.  48,  43  L.  ed.  67; 
New  Orleans  Gaslight  Co.  v.  Drainage  Commission  of  New  Orleans. 
197  U.  S.  453,  49  L.  ed.  831. 

UTAH.— Henderson  v.  Ogden  City  R.  Co.,  7  Utah  199,  26  Pac.  286. 

VIRGINIA.— Norfolk  R.  &  Light  Co.  v.  Corletto,  100  Va.  355. 
41  S.  E.  740;  Roanoke  Gas  Co.  v.  Roanoke,  88  Va.  810,  14  S.  E.  665. 

WASHINGTON.— Seattle  v.  Columbia,  &c.,  R.  Co.,  6  Wash.  379, 
33  Pac.  1048. 

WEST  VIRGINIA.— Clarksburg  Electric  Light  Co.  v.  Clarksburg, 
47  W.  Va.  739,  35  S.  E.  994,  50  L.  R.  A.  142. 

WISCONSIN.— Allen  v.  Clausen,  114  Wis.  244,  90  N.  W.  181; 
Ashland  St.  R.  Co.  v.  Ashland,  78  Wis.  271,  47  N.  W.  619;  State  ex 
rel.  Smythe  v.  Milwaukee  Independent  Tel.  Co.,  133  Wis.  588,  114  N. 
W.  108;  Washburn  Waterworks  Co.  v.  Washburn,  129  Wis.  73,  108 
N.  W.  194. 


457  STREETS   AND    HIGHWAYS.  §  399 

public,  for  as  the  court  says:  "'The  legislature  of 
the  state  represents  the  public  at  large,  and  has  full 
and  paramount  authority  over  all  public  ways  and 
public  places.'  *To  the  commonwealth  here,'  says 
Chief  Justice  Gibson,  'as  to  the  king  of  England,  be- 
longs the  franchise  of  any  highway  as  a  trustee  of  the 
public;  and  streets  regulated  and  repaired  by  the  au- 
thority of  a  municipal  corporation  are  as  much  high- 
ways as  are  rivers,  railroads,  canals,  or  public  roads 
laid  out  by  the  authority  of  the  quarter  sessions.'  2 
Dill.  Mun.  Corp.  (3d  ed.)  §656.  'As  the  highways  of 
a  state,  including  streets  in  cities,  are  under  the  para- 
mount and  priinary  control  of  the  legislature,  and  as 
all  municipal  powers  are  derived  from  the  legislature, 
it  follows  that  the  authority  of  municipalities  over 
streets,  and  the  uses  to  which  they  may  be  put,  de- 
pends entirely  upon  their  charters  or  legislative  enact- 
ments applicable  to  them.'  2  Dill.  Mun.  Corp.  (3d 
ed.)  §  680.  It  is  also  well  settled  that  the  right  to  use 
the  streets  and  other  public  thoroughfares  of  a  city 
for  the  purpose  of  placing  therein  or  thereon  pipes, 
mains,  wires,  and  poles  for  the  distribution  of  gas, 
water,  or  electric  lights  for  public  and  private  use,  is 
not  an  ordinary  business  in  which  any  one  may  engage, 
but  is  a  franchise  belonging  to  the  government,  the 
privilege  of  exercising  which  can  only  be  granted  by 
the  state  or  by  the  municipal  government  of  the  city, 
acting    under    legislative    authority." 

§  399.  Municipal  control  of  streets  delegated  by 
state. — Having  absolute  control  of  the  streets  and 
highways,  the  state  may  grant  the  right  to  use  them 
to  municipal  public  utilities,  either  directly  or  through 
its  agent,  the  municipality.  As  the  court  expresses  it 
in  the  case  of  Allen  v.  Clausen.  114  A\'is.  244,  90  N. 
W.  181,  decided  in  1902:  "That  the  highways  of  the 
state  are  under  the  control  of  the  general   state  gov- 


§  400  PUBLIC    UTILITIES.  458 

ernment,  and  that  the  right  to  use  the  same  for  tele- 
graphs, telephones,  water  pipes  or  street  railways  is 
by  franchise  emanating  from  the  state,  is  declared  in 
many  of  the  foregoing  decisions;  also  in  State  v.  Mad- 
ison St.  Ry.  Co.,  72  Wis.  612,  40  N.  W.  487,  i  L.  R.  A. 
771 ;  City  of  Marshfield  v.  Wisconsin  Tel.  Co.,  102 
Wis.  604,  78  N.  W.  735,  44  L.  R.  A.  565;  State  v. 
Portage  City  Water  Co.,  107  Wis.  441,  83  N.  W.  697; 
State  V.  Sheboygan,  iii  Wis.  23,  86  N.  W.  657;  3 
Cook,  Corp.  §  913.  As  a  corollary,  it  results  that  the 
municipal  corporations  have  power  to  make  such 
grants  only  by  delegation  from  the  state." 

§  400.  Power  must  be  expressly  or  clearly  dele- 
gated.— Where  the  state  has  delegated  certain  author- 
ity to  the  municipality  to  grant  franchise  privileges  to 
the  municipal  public  utility  and  to  regulate  and  control 
the  streets,  the  municipal  corporation  has  only  such 
power  in  these  respects  as  are  clearly  conferred  upon 
it  by  the  statute  and  any  grant  of  the  municipality 
not  covered  by  the  authority  delegated  to  it  is  void 
for  want  of  authority  in  the  municipality  to  make,  for 
as  the  court  in  the  case  of  Beekman  v.  Third  Ave.  R. 
Co.,  153  N.  Y.  144,  47  N.  E.  277,  decided  in  1897,  says: 
"The  authority  to  make  use  of  the  public  streets  of 
a  city  for  railroad  purposes  primarily  resides  in  the 
state,  and  is  a  part  of  the  sovereign  power;  and  the 
right  or  privilege  of  constructing  and  operating  rail- 
roads in  the  streets,  which,  for  convenience,  is  called 
a  'franchise,'  must  always  proceed  from  that  source, 
whatever  may  be  the  agencies  through  which  it  is  con- 
ferred. The  use  or  occupation  of  the  streets  for  such 
purposes,  without  the  grant  or  permission  of  the  state 
through  the  legislature,  constitutes  a  nuisance,  which 
may  be  restrained  by  individuals  injuriously  affected 
thereby.     Fanning  v.  Osborne,  102  N.  Y.  441,  7  N.  E. 


459  STREETS    AND    HIGHWAYS.  §  4OO 

307.  The  city  authorities  have  no  power  to  grant  the 
right  except  in  so  far  as  they  may  be  authorized  by 
the  legislature,  and  then  only  in  the  manner  and  upon 
the  conditions  prescribed  by  the  statute.  Davis  v. 
Mayor,  &c.,  14  N.  Y.  506;  Milhau  v.  Sharp,  27  N.  Y. 
611;  People  V.  Kerr,  id.  188.  .  .  .  The  legislature, 
however,  in  virtue  of  its  general  power  over  municipal- 
ities, may  regulate  the  mode  and  manner  in  which  such 
consent  shall  be  given  by  the  authorities  having  the 
control  of  the  street,  and  may  prescribe  the  conditions 
upon  which  it  may  be  given,  and  all  these  matters  have 
been  regulated   by  statute." 

An  early  decision  defining  the  manner  in  which 
franchise  rights  to  use  the  streets  may  be  conferred 
by  the  municipality  only  on  authority  delegated  to  it 
expressly  or  by  necessary  implication  is  that  of  Eich- 
els  V.  Evansville  St.  R.  Co.,  78  Ind.  261,  41  Am.  Rep. 
561,  decided  in  1881,  where  the  court  held  that  the 
power  to  confer  the  necessary  franchise  rights  to  in- 
stall and  operate  a  street  railway  system  is  not  covered 
by  the  ordinary  general  powers  provided  in  the  char- 
ter of  the  municipality,  but  that  being  an  extraordi- 
nary power  it  must  be  expressly  conferred;  for  as  the 
court  says:  "Such  an  authority  must,  it  is  true,  be 
conferred  by  statute,  but  it  is  not  indispensably  essen- 
tial that  the  grant  should  be  stated  in  express  words. 
If  it  is  conferred  by  necessary  implication,  it  will  be 
upheld  and  enforced.  But  the  grant  must  be  conferred 
either  by  express  words  or  be  necessarily  implied. 
Without  such  a  grant  the  public  streets  can  not  be 
used  by  a  railroad  corporation  for  the  transportation 
of  passengers  for  hire.  The  right  to  so  use  the  streets 
is  a  franchise,  and  such  a  franchise  as  can  only  exist 
by  force  of  a  legislative  grant.  The  power  to  grant 
franchises  is  a  high  legislative  trust." 


§  401  PUBLIC    UTILITIES.  460 

§  401.  Delegated  power  may  be  revoked  or  modi- 
fied by  state. — From  the  fact  that  all  control  over 
streets  is  vested  in  the  state,  it  necessarily  follows  that 
any  power  delegated  by  it  to  the  municipality  may  be 
modified  or  withdrawn  by  the  state  and  that  it  may 
grant  franchise  rights  to  the  use  of  the  streets  of  any 
municipality,  although  it  may  have  delegated  the  right 
to  make  such  grants  to  the  municipality  except  in 
cases  of  constitutional  provision  to  the  contrary  or 
where  such  action  would  result  in  the  impairment  of 
contract  rights  prohibited  by  the  constitution,  for  as 
the  court  in  the  case  of  Newcastle  v.  Lake  Erie  &  W. 
R.  Co.,  155  Ind.  18,  57  N.  E.  516,  decided  in  1900, 
says:  'The  control  of  streets,  as  well  as  of  all  other 
public  highways,  is  primarily  in  the  legislature.  But 
the  legislature  has  delegated  to  municipalities  the  ex- 
clusive control  of  their  streets  and  alleys.  As  the  leg- 
islature gave,  so  that  body  may  take  away  or  modify, 
the  power.  There  is  no  doubt  of  the  legislature's  au- 
thority to  grant  railroad  companies  the  right  to  lay 
their  tracks  longitudinally  upon  the  streets  of  a  munici- 
pality without  its  consent  or  over  its  objection." 

A  recent  decision  of  the  Supreme  Court  of  Florida 
to  the  same  effect  is  furnished  in  the  case  of  State  v. 
Jacksonville  St.  R.  Co.,  29  Fla.  590,  10  So.  590,  decided 
in  1892,  where  the  court  held  that  the  right  to  control 
the  use  of  streets  belongs  primarily  to  the  state,  and 
it  may  delegate  it  to  the  municipality,  but  this  must 
be  done  expressly  by  statute  before  the  municipal 
corporation  has  the  power  to  grant  such  franchise 
rights  and  that  such  delegation  of  power  does  not  in 
itself  prevent  the  granting  of  similar  rights  by  the 
state  itself,  for  as  the  court  says:  "The  legislature 
has  undoubtedly  supervision  and  control  of  highways 
and  streets,  and  may  authorize  the  construction  of  a 
railroad,   operated  either  by  steam   or   animal   power, 


461  STREETS   AND    HIGHWAYS.  §  402 

across  or  along  them.  This  results  from  the  dominant 
power  which  the  state  possesses  over  all  its  highways; 
and  it  may  be  done  without  the  consent  of  municipal 
authorities.  2  Dill.  Mun.  Corp.  §  656;  Elliott,  Roads 
&  S.  pp.  562;  Pierce,  R.  R.  p.  246;  Lawson,  Rights, 
Rem.  &  Pr.  §  4003;  Eichels  v.  Railway  Co.,  78  Ind. 
261;  Railroad  Co.  v.  Mayor,  &c.,  45  Ga.  602;  Hodges 
V.  Railway  Co.,  58  Md.  603." 

§  402.  Streets  dedicated  in  trust  for  benefit  of  pub- 
lic.— The  fiduciary  obligation  imposed  upon  the  state 
or  its  agency,  the  municipality,  to  regulate  and  control 
the  use  of  streets  and  highways  in  the  interest  and  for 
the  benefit  of  the  public  and  the  right  of  the  state  at 
any  time  to  revoke  the  exercise  of  any  power  that  it 
may  have  delegated  to  the  municipality  in  this  respect 
is  well  stated  in  the  recent  case  of  Smith  v.  McDowell, 
148  111.  51,  35  N.  E.  141,  22  L.  R.  A.  393,  decided  in 
1893,  where  the  court  says:  "By  the  platting  of  the 
village,  the  streets,  in  their  entire  width  and  length, 
were  dedicated  to  the  use  of  the  public  as  streets. 
The  village  thereby  became  seised  in  fee  of  the  streets 
and  alleys,  for  the  use  of  the  local  and  general  public, 
holding  them  in  trust  for  such  uses  and  purposes,  and 
none  other.  Alton  v.  Illinois  Transp.  Co.,  12  111.  38; 
Carter  v.  Chicago,  57  111.  285;  Chicago  v.  McGinn,  51 
111.  266;  Jacksonville  v.  Jacksonville  Ry.  Co.,  67  111. 
540;  Quincy  v.  Jones,  76  111.  231;  Kreigh  v.  Chicago, 
86  111.  410;  Stack  v.  East  St.  Louis,  85  111.  377;  Lee  v. 
Town  of  Mound  Station,  118  111.  312,  8  N.  E.  759. 
These  municipal  corporations  are  instrumentalities  of 
the  state,  exercising  such  powers  as  are  conferred  up- 
on them  in  the  government  of  the  municipality.  Their 
power  is  measured  by  the  legislative  grant,  and  they 
can  exercise  such  powers  only  as  are  expressly  granted 
or  are  necessarily  implied  from   the  powers  expressly 


§  403  PUBLIC    UTILITIES.  462 

conferred.  The  legislature,  representing  the  great 
body  of  the  people  of  the  state,  when  no  private  right 
is  invaded  or  trust  violated  (Jacksonville  v.  Jackson- 
ville Ry.  Co.,  supra),  may  repeal  the  law^  creating 
them,  or  exercise  such  control  in  respect  of  the  streets, 
alleys,  and  public  grounds  v^ithin  the  municipalities  of 
the  state  as  it  shall  deem  for  the  interest  of  the  people 
of  the  state.  Dill.  Mun.  Corp.  §  541 ;  Chicago  v.  Rum- 
sey,  87  111.  355;  People  v.  Walsh,  96  111.  253;  Chicago 
V.  Union  Bldg.  Assn.,  102  111.  397;  Commissioners  v. 
McMullen,  134  111.  170,  25  N.  E.  (i'jdr 

§  403.  Title  to  street  in  municipality  trustee  for 
public. — Although  the  fee  of  the  street  may  be  in  the 
municipality,  it  does  not  own  the  fee  in  the  street  ab- 
solutely, but  holds  it  as  trustee  for  the  benefit  of  the 
public,  although  the  funds  of  the  municipality  may 
have  been  used  in  the  purchase  of  the  street  in  the  ex- 
ercise of  the  power  of  eminent  domain;  nor  does  the 
municipality  have  the  power,  unless  clearly  authorized 
by  statute,  to  grant  such  franchise  rights  to  the  use 
of  the  streets  for  private  purposes,  for  as  the  court  in 
the  case  of  Stanley  v.  Davenport,  54  Iowa,  463,  2  N. 
W.  1064,  37  Am.  Rep.  216,  decided  in  1880,  says:  "The 
fee  of  the  streets  is  in  the  city,  and  yet  it  is  held  in 
trust  for  the  use  and  benefit  of  the  public.  The  city 
does  not  have  the  authority  to  sell  and  convey  the 
title  held  by  it  or  authorize  the  streets  to  be  used  for 
private  purposes.  Nor  can  it  without  legislative  au- 
thority grant  the  use  of  a  street  for  a  public  purpose, 
which  renders  it  dangerous  for  the  public  to  travel 
over  it  in  any  other  manner.  The  power  partakes  of 
that  of  eminent  domain,  which,  under  our  government, 
can  only  be  granted  by  the  law-making  power  of  the 
state.  Streets  and  highways  are  under  the  exclusive 
control  of  the  general  assembly.     It  matters  not  if  the 


463  STREETS   AND    HIGHWAYS.  §  404 

fee  of  the  streets  is  in  the  city,  it  has  no  authority  to 
control  or  grant  rights  and  privileges  thereto  or  there- 
on, unless  it  has  been  so  authorized.  The  power  and 
authority  of  the  city  is  contained  in  its  charter  and 
bounded  thereby.  It  has  no  other  or  different  control 
of  the  streets  than  is  prescribed  in  the  charter  or  the 
general  statutes  of  the  state." 

§  404.      Municipal    consent    condition    precedent. — 

Where,  however,  the  right  to  control  the  use  of  the 
streets  is  delegated  absolutely  to  the  municipality,  it 
may  provide  its  own  terms  and  conditions  in  connec- 
tion with  the  granting  of  any  franchise  privileges  for 
their  use.  Having  the  sole  control,  together  with  the 
absolute  right  to  stipulate  the  conditions  upon  which 
the  use  of  the  streets  may  be  enjoyed,  the  municipality 
has  the  power  to  prevent  their  use  by  municipal  public 
utilities,  and  unless  its  authority  is  modified  or  re- 
voked, may  in  efifect  annul  and  render  void  the  grant- 
ing by  the  state  of  the  franchise  right  to  be  a  public 
service  corporation  by  preventing  it  from  exercising 
its  rights  as  such  to  install  and  operate  a  municipal 
public  utility  system  within  such  a  municipality,  for 
as  the  United  States  Supreme  Court  said  in  the  case 
of  Blair  v.  Chicago,  201  U.  S.  400,  50  L.  ed.  801,  de- 
cided in  1906:  "What,  then,  was  conferred  in  the 
franchise  granted  by  the  state?  It  was  the  right  to 
be  a  corporation  for  the  period  named,  and  to  acquire 
from  the  city  the  right  to  use  the  streets  upon  contract 
terms  and  conditions  to  be  agreed  upon.  The  fran- 
chise conferred  by  the  state  is  of  no  practical  value 
until  supplemented  by  the  consent  and  authority  of 
the  council  of  the   city." 

§  405.     No  exclusive  use  unless  expressly  provided. 
— That    the    general    power    to    grant    such    franchise 


§  406  PUBLIC    UTILITIES.  464 

rights  to  the  use  of  its  streets  as  delegated  to  munici- 
palities does  not  give  the  municipality  the  right  to 
grant  exclusive  franchise  rights  in  the  use  of  its  streets 
is  the  general  rule  w^hich  is  well  stated  by  the  United 
States  Supreme  Court  in  the  case  of  Detroit  Citizens' 
St.  R.  Co.  V.  Detroit  R.,  171  U.  S.  48,  43  L.  ed.  67, 
decided  in  1898,  as  follovvrs:  "That  such  power  must 
be  given  in  language  explicit  and  express,  or  neces- 
sarily to  be  implied  from  other  powers,  is  now  firmly 
fixed.  There  were  many  reasons  which  urged  to  this 
— reasons  which  flow  from  the  nature  of  the  municipal 
trusty  even  from  the  nature  of  the  legislative  trust,  and 
those  which,  without  the  clearest  intention,  explicitly 
declared,  insistently  forbid  that  the  future  should  be 
committed  and  bound  by  the  conditions  of  the  present 
time,  and  functions  delegated  for  public  purposes  be 
paralyzed  in  their  exercise  by  the  existence  of  exclu- 
sive privileges." 

§  406.  No  power  to  alienate  or  obstruct  streets 
implied. — A  striking  illustration  of  the  limitation  placed 
on  the  power  of  municipal  corporations  to  grant  spe- 
cial rights  to  the  use  of  their  streets  is  furnished  in 
the  case  of  Mclllhinney  v.  Trenton,  148  Mich.  380,  iii 
N.  W.  1083,  decided  in  1907,  where  the  court  held  that 
unless  the  municipality  was  clearly  authorized  by  the 
legislature  it  had  no  power  to  grant  any  right  to  the 
use  of  its  streets  which  would  interfere  with  their  use 
by  the  general  public  for  travel  and  that  any  attempt 
to  obstruct  them  by  the  erection  of  municipal  build- 
ings or  other  like  structures  was  entirely  unauthorized. 
In  the  course  of  this  opinion  the  court  said:  "Munici- 
pal corporations,  notwithstanding  their  broad  and  com- 
prehensive powers,  have  no  right,  unless  authorized 
by  the  legislature,  to  alienate  their  streets  or  devote 
them  to  the  uses  inconsistent  with  the  rights  of  the 


465  STREETS   AND    HIGHWAYS.  §  407 

general  public  and  the  abutting  landowners. 
The  municipality  holds  the  streets  and  power  to  regu- 
late and  control  them  in  trust  for  the  public,  and  can 
not  put  them  to  any  use  inconsistent  with  street  pur- 
poses. Thus  cities  have  no  right  to  use  their  streets 
for  the  erection  of  municipal  buildings  or  works,  and 
it  has  been  held  that  placing  of  a  standpipe  in  a  public 
street,  the  fee  of  which  was  in  the  municipality,  was 
an  unlawful  use  of  the  street." 

§  407.  Telephone  and  telegraph  not  limited  by  lo- 
cal control. — That  the  best  interests  of  the  general 
public  may  be  better  conserved  and  more  comprehen- 
sively considered  by  the  state  retaining  control  rather 
than  delegating  it  to  its  different  municipalities  in  the 
case  of  such  municipal  public  utilities  as  the  telephone 
and  telegraph  where  the  field  of  operation  extends 
beyond  any  particular  municipality  and  is  accordingly 
not  local,  but  may  be  even  interstate  in  its  operations, 
and  may  pass  through  the  streets  of  many  municipali- 
ties is  well  indicated  by  the  case  of  Texarkana  v. 
Southwestern  Tel.  &  T.  Co.,  48  Tex.  Civ.  App.  16,  106 
S.  W.  915,  decided  in  1907,  where  the  court  says: 
"The  public  highways  of  the  state,  including  even  the 
streets  and  alleys  within  incorporated  towns  and  cities, 
belong  to  the  state,  and  the  supreme  power  to  regu- 
late and  control  them  is  lodged  with  the  people 
through  their  representatives — the  legislature.  What- 
ever power  of  control  is  lodged  in  the  city  council  is 
delegated  by  the  legislature.  When  we  consider  the 
nature  of  the  business  of  telegraph  and  telephone  lines 
in  this  busy  commercial  age,  we  have  a  most  cogent 
reason  for  the  legislature  declining  to  commit  to  the 
arbitrary  control  of  the  municipalities  throughout  the 
state  the  use  by  such  companies  of  the  public  streets 
and    alleys.      These    companies    are    not    primarily    of 

30— Pub.  Ut. 


§  408  PUBLIC    UTILITIES.  466 

local  concern,  affecting  only  the  inhabitants  of  the 
towns  and  cities  through  which  they  pass,  but  they 
essentially  concern  the  public  at  large,  in  that  they 
furnish  quick  and  cheap  means  of  communication  be- 
tween all  points  throughout  the  country,  by  which  a 
very  large  percentage  of  the  business  of  the  country 
is  transacted.  In  other  words,  the  business  is  such  a 
one  as  calls  for  the  exercise  of  state  regulation  rather 
than  the  delegated  power  of  municipal  control." 

§  408.     Municipal   control  limited   to   municipality. 

— The  control  of  its  streets  vested  in  the  municipality 
is  naturally  limited  to  the  territory  included  within 
the  municipality  and  where  the  service  extends  be- 
yond its  territory,  it  has  no  power  to  regulate  any 
public  utility  service,  and  as  the  service  rendered  is 
not  local  so  that  the  inhabitants  of  the  municipality 
are  not  alone  concerned  it  should  not  be  subject  to  its 
sole  regulation  and  control.  This  principle  is  further 
illustrated  and  established  by  the  case  of  South  Pasa- 
dena V.  Los  Angeles  Terminal  R.  Co.,  109  Cal.  315,  41 
Pac.  1093,  decided  in  1895,  where  the  plaintiff  city 
attempted  to  limit  the  charges  for  the  services  ren- 
dered by  the  defendant  beyond  its  own  territory,  which 
the  court  held  to  be  an  unreasonable  and  unauthorized 
interference  with  the  right  of  other  municipalities  and 
the  territory  intervening  between  them  that  received 
the  service  afforded  by  the  particular  municipal  public 
utility  system.  In  holding  the  attempt  to  so  regulate 
the  service  void,  the  court  said:  "A  municipal  ordi- 
nance must  consist  with  the  general  powers  and  pur- 
poses of  the  corporation;  must  harmonize  with  the 
general  laws  of  the  state,  the  municipal  charter,  and 
the  principles  of  the  common  law.  One  of  the  limita- 
tions upon  such  ordinances  is  that  they  can  have  no 
extraterritorial  force  unless  by  express   permission  of 


467  STREETS   AND    HIGHWAYS.  §  409 

the  sovereign  power.  In  the  nature  of  things,  this 
must  be  so  unless  intolerable  confusion  and  evil  is  to 
result;  and  the  constitution  of  the  state,  recognizing 
the  necessity  for  such  a  restriction,  has  provided  (arti- 
cle II,  section  ii),  that  'any  county,  city,  etc.,  may 
make  and  enforce  within  its  limits  all  such  local,  .  .  . 
and  other  regulations  as  are  not  in  conflict  with  gen- 
eral laws.'  Here  was  a  road  lying  partly  within  the 
confines  of  at  least  three  municipalities — Los  Angeles, 
South  Pasadena,  and  Pasadena.  Conceding  the  right 
of  plaintiff  to  impose  a  limitation  on  the  charges  to 
be  made  for  passage  between  stations  within  its  limits 
and  stations  elsewhere,  then  the  other  cities  named 
have,  or  might  have,  the  same  right." 

§  409.  Power  to  grant  perpetual  franchise  not  im- 
plied.— The  early  case  of  Milhau  v.  Sharp,  17  Barb. 
435,  28  Barb.  228,  9  How.  Prac.  102,  decided  in  1854, 
enunciated  the  principle  which  is  of  general  application 
that  the  power  which  may  be  delegated  to  the  munici- 
pality to  regulate  from  time  to  time  the  rates  to  be 
charged  by  certain  municipal  public  utilities  in  con- 
nection with  the  grant  of  such  franchise  privileges  in 
the  use  of  its  streets  does  not  include  the  power  to 
surrender  and  absolutely  barter  away  its  control  of 
this  matter  by  the  grant  of  a  perpetual  and  irrevocable 
right  of  way  to  a  particular  municipal  public  utility, 
for  as  the  court  said:  "Instead  of  regulating  the  use 
of  the  street,  the  use  itself,  to  the  extent  specified  in 
the  resolution,  is  granted  to  the  associates  of  the 
Broadway  Railroad.  For  what  has  been  deemed  an 
adequate  consideration,  the  corporation  has  assumed 
to  surrender  a  portion  of  their  municipal  authority, 
and  has,  in  legal  effect,  agreed  with  the  defendants 
that,  so  far  as  they  may  have  occasion  to  use  Broad- 
way,  for   the   purpose    of   constructing   and   operating 


§  409  PUBLIC    UTILITIES.  468 

their  railroad,  the  right  to  regulate  and  control  the 
use  of  that  street  shall  not  be  exercised.  That  the 
powers  of  the  corporation  may  be  surrendered,  I  do 
not  deny;  but  I  think  it  can  only  be  done  by  authority 
of  the  legislature." 

That  the  power  to  grant  such  extended  and  mate- 
rial franchise  rights  without  express  statutory  author- 
ity does  not  vest  in  the  municipality  by  a  mere  dele- 
gation of  the  right  to  control  its  streets  is  decided  by 
the  court  in  the  case  of  Clarksburg  Electric  Light  Co. 
V.  Clarksburg,  47  W.  Va.  739,  35  S.  E.  994,  50  L.  R. 
A.  142,  decided  in  1900,  as  follows:  "Surely,  we  can 
not  say,  contrary  to  the  drift  of  all  the  law  of  the 
country,  that  the  mere  power  to  control  streets  and 
light  the  same  carries  with  it  by  implication  the  enor- 
mous power  to  tie  the  hands  of  an  important  munici- 
pality for  many  years,  or  that  such  a  power  is  indis- 
pensable or  necessary  to  enable  the  municipality  to 
carry  out  its  legitimate  functions." 

The  case  of  Elizabeth  City  v.  Banks,  150  N.  Car. 
407,  64  S.  E.  189,  decided  in  1909,  further  states  the 
general  rule  that  authority  must  be  specially  delegated 
to  the  municipality  before  it  can  grant  special  fran- 
chise rights  to  municipal  public  utilities  as  follows: 
"In  the  absence  of  any  express  grant  of  power  in  the 
charter,  it  would  be  difficult  if  we  adhere  to  the  canons 
of  construction  of  corporate  charters  to  find  it  by  im- 
plication. It  will  hardly  be  contended  that  the  laying 
of  gas  pipes  for  the  purpose  of  furnishing  light,  fuel, 
and  power  to  the  citizens  by  a  private  business  enter- 
prise is  essential  to,  or  implied  in,  the  power  to  regu- 
late and  control  the  use  of  the  streets.  As  we  have 
seen,  the  courts  have  not  found  the  power  except  as 
an  express  grant  from  the  sovereign." 

It  necessarily  follows  that,  where  because  of  con- 
stitutional   limitations,    the    state    itself    has    not    the 


469  STREETS    AND    HIGHWAYS.  §  4IO 

power  to  grant  a  particular  franchise  right  which  is 
exclusive  and  perpetual  in  its  terms,  the  municipality 
likewise  has  no  such  power,  for  as  the  court  in  the 
case  of  Birmingham  &  Pratt  Mines  St.  R.  Co.  v.  Bir- 
mingham St.  R.  Co.,  79  Ala.  465,  58  Am.  Rep.  615, 
decided  in  1885,  says:  "The  exclusive  right  of  the 
appellee  to  the  privilege  claimed,  in  our  opinion,  can 
not  be  sustained.  The  general  assembly  would  itself 
have  no  power  under  the  constitution  to  make  such 
a  grant.  A  fortiori,  a  mere  municipality  would  have 
no  such  power." 

§  410.  Change  of  street  grade  requiring  relocation 
of  pipes  valid. — The  proper  exercise  of  the  police  power 
permits  the  municipality  as  well  as  the  state  indepen- 
dently of  any  franchise  grants  or  statutory  authority 
that  may  be  conferred  either  upon  the  public  service 
corporation  or  the  municipality  to  protect  the  interests 
of  the  public  in  the  reasonable  use  and  enjoyment  of 
streets  and  highways  for  which  they  were  dedicated 
and  in  the  interest  of  the  public  to  conserve  the  public 
health  and  the  general  welfare  and  convenience  of  the 
people.  Under  the  rule  which  is  universally  accepted, 
the  municipality  has  not  the  power  to  abridge  or  sur- 
render its  right  to  perform  its  duties  to  the  public, 
especially  in  maintaining  its  streets  for  the  advantage 
of  the  public  as  a  means  of  transportation  and  com- 
munication and  the  municipal  officers  can  not  bind 
their  successors  in  the  proper  discharge  of  such  duties 
because  such  powers  are  legislative  and  can  not  be 
abridged.  The  court  in  the  case  of  Columbus  Gas- 
light &  Coke  Co.  V.  Columbus,  50  Ohio  St.  65,  33  N. 
E.  292,  19  L.  R.  A.  510,  40  Am.  St.  648.  decided  in 
1893,  in  upholding  the  right  of  the  municipality  to 
change  the  grade  of  its  streets  without  bearing  the 
expense    thereby    occasioned   the    plaintiff   corporation 


§  410  PUBLIC    UTILITIES.  470 

in  the  relocation  of  its  pipes  said:  "It  would  follow 
from  this  that  in  prescribing  regulations,  or  annexing 
conditions,  by  the  city,  to  the  exercise  by  a  gas  com- 
pany of  a  right  in  a  street  to  enjoy  the  same  for  this 
secondary  use,  the  council  has  not  the  authority  to 
cede  away  nor  bargain  away  the  right  of  the  city  to 
perform  its  public  duties,  especially  as  to  a  primary 
use  of  its  streets,  nor  to  abridge  the  capacity  of  its 
successors  to  discharge  those  duties,  unless  some  ex- 
press provision  of  statute  is  found  to  that  effect,  and 
that  is  not  claimed.  .  .  .  An  ordinance  to  grant  an 
exclusive  right  or  a  perpetual  right  to  occupy  a  par- 
ticular part  of  the  street  would  be  an  attempt  to  bind 
succeeding  councils  as  to  their  exercise  of  legislative 
power,  and  would,  for  reasons  stated,  be  ineffectual. 
The  grant  by  the  city  must  be  interpreted  in  the  light 
of  the  right  and  duty  of  the  city  to  regrade,  whenever 
in  its  judgment  the  public  interest  demands;  and 
whatever  easement  the  gas  company  can  receive,  it 
must  accept  and  enjoy  in  common  with  equivalent 
rights  which  have  been  or  may  be  acquired  by  other 
public  agencies — rights  of  a  like  secondary  character; 
and  all  must  give  way  to  the  paramount  duty  of  the 
city  to  care  for  the  streets,  and  keep  them  open,  in 
repair,  and  convenient  for  the  general  public.  This 
duty  would  be  seriously  interfered  with  if  the  city 
could  not  change  the  grade  of  its  streets  save  upon 
the  condition  that  it  should  make  compensation  to 
every  gas  company,  and  water  company,  and  telephone 
company,  and  electric  light  company,  and  street  rail- 
way company,  for  inconvenience  and  expense  thereby 
occasioned.  All  such  agencies  must  be  held  to  take 
their  grants  from  the  city  upon  the  condition,  implied 
where  not  expressed,  that  the  city  reserves  the  full 
and  unconditional  power  to  make  any  reasonable 
change  of  grade  or  other  improvement  in  its  streets." 


471  STREETS   AND    HIGHWAYS.  §411 

§411.  Sewer  systems  paramount  to  public  utility 
pipes. — That  the  power  of  the  municipality  to  install 
a  sewer  system  in  the  interest  of  its  public  health  is 
paramount  to  the  speci.il  franchise  rights  of  a  munici- 
pal public  utility,  which  was  required  to  remove  cer- 
tain pipe  lines  in  order  to  permit  of  the  installation  of 
the  sewer  system,  is  the  effect  of  the  decision  in  the 
case  of  National  Water-Works  Co.  v.  Kansas,  28  Fed. 
921,  decided  in  1886,  where  the  court  said:  "Sewerage 
is  a  matter  unquestionably  affecting  largely  the  public 
health,  and  no  municipality  can  make  a  contract  divest- 
ing or  abridging  its  full  control  over  such  matters. 
The  contract  between  the  plaintiff  and  the 
defendant  must  be  interpreted  in  the  light  of  this  well- 
established  rule;  and,  so  interpreted,  the  plaintiff  took 
its  right  to  lay  its  pipes  in  the  streets  of  the  city  sub- 
ject to  the  paramount  and  inalienable  right  of  the  city 
to  construct  sewers  therein  whenever  and  wherever,  in 
its  judgment,  the  public  interest  demand.  Laying  its 
pipes  subject  to  this  right  of  the  city,  it  has  no  cause 
of  action  if,  in  consequence  of  the  exercise  of  this 
right,  it  is  compelled  to  relay  its  pipes." 

That  the  exercise  of  the  police  power  in  the  inter- 
est of  the  public  health  by  the  municipality,  although 
it  interferes  with  the  private  rights  of  individuals  or 
municipal  public  utilities  will  be  justified  if  reasonable 
and  not  arbitrary  is  the  effect  of  the  decision  of  the 
United  States  Supreme  Court  in  the  case  of  New  Or- 
leans Gaslight  Co.  v.  Drainage  Commission  of  New 
Orleans,  197  U.  S.  453,  49  L.  ed.  831,  decided  in  1905, 
where  the  court  said:  "It  is  admitted  that  in  the  ex- 
ercise of  this  power  there  has  been  no  more  interfer- 
ence with  the  property  of  the  gas  company  than  has 
been  necessary  to  the  carrying  out  of  the  drainage 
plan.  There  is  no  showing  that  the  value  of  the  prop- 
erty  of   the   gas   company   has   been    depreciated,    nor 


§  412  PUBLIC    UTILITIES.  472 

that  it  has  suffered  any  deprivation  further  than  the 
expense  which  was  rendered  necessary  by  the  chang- 
ing of  the  location  of  the  pipes  to  accommodate  the 
work  of  the  drainage  commission.  The  poHce  power, 
in  so  far  as  its  exercise  is  essential  to  the  health  of 
the  community,  it  has  been  held  can  not  be  contracted 
away.  ...  In  the  exercise  of  the  police  power  of 
the  state,  for  a  purpose  highly  necessary  in  the  pro- 
motion of  the  public  health,  it  has  become  necessary  to 
change  the  location  of  the  pipes  of  the  gas  company 
so  as  to  accommodate  them  to  the  new  public  work. 
In  complying  with  this  requirement  at  its  own  ex- 
pense, none  of  the  property  of  the  gas  company  has 
been  taken,  and  the  injury  sustained  is  damnum  absque 
injuria." 

§  412.  Arbitrary  exercise  of  police  power  not  sus- 
tained.— Where  the  sewer  system  can  be  installed 
along  the  side  of  the  street  equally  well  and  at  prac- 
tically the  same  cost,  thereby  avoiding  the  necessity 
of  requiring  the  removal  of  tracks  and  other  equip- 
ment of  the  municipal  public  utility,  the  municipality 
in  the  exercise  of  the  police  power  is  not  justified  in 
insisting  on  the  sewer  system  being  placed  in  the  cen- 
ter of  the  street,  for  as  the  court  says  in  the  case  of 
Des  Moines  City  R.  Co.  v.  Des  Moines,  90  Iowa,  770, 
58  N.  W.  906,  26  L.  R.  A.  767,  decided  in  1894:  "The 
evidence  shows  clearly  that  the  sewer  can  be  placed 
outside  of  the  line  of  the  railway  without  impairing, 
in  any  respect,  the  efficiency  of  the  sewer  system,  and 
that  sanitary  considerations  do  not  require  that  it  be 
placed  in  the  center  of  the  street.  .  .  .  The  evidence 
shows  that  the  expense  of  constructing  the  sewer  at 
the  side  of  the  street  need  not  be  materially,  if  any, 
greater  than  to  place  it  in  the  center.  We  are  of  the 
opinion   that   the  reasons   for  placing  it  in  the   center 


473  STREETS    AND    HIGHWAYS.  §413 

of  the  street  are  not  of  sufficient  importance  to  impose 
upon  the  plaintiff  the  burden  of  removing  its  track, 
and  to  expose  the  patrons  of  this  line  to  the  inconven- 
ience and  danger  which  would  be  caused  by  such  a 
removal.  In  other  words,  we  think  the  demand  of  the 
city  is  unreasonable." 

§  413.  Municipcdity  can  not  barter  away  right  to 
exercise  police  power. — That  the  city  can  not  bind 
itself  by  contract,  however,  not  to  act  in  the  interest 
of  the  general  public  and  for  the  public  health  is  well 
expressed  in  the  case  of  Macon  Consol.  St.  R.  Co.  v. 
Macon,  112  Ga.  782,  38  S.  E.  60,  decided  in  1901, 
where  the  court  said:  "This  agreement  is  an  attempt 
on  the  part  of  the  mayor  and  council  to  tie  their  hands 
as  well  as  those  of  their  successors  with  respect  to  a 
matter  of  great  public  interest.  It  is,  in  effect,  a  con- 
tract on  their  part  that  they  will  not  in  the  future,  no 
matter  how  much  the  public  convenience  or  safety 
may  demand  it,  attempt  to  regulate  the  location  of 
the  tracks  of  this  company  in  this  street.  We  are 
clear  that  this  can  not  be  done.  Municipal  corpora- 
tions 'may  make  authorized  contracts,  but  they  have 
no  power,  as  a  party,  to  make  contracts  or  pass  by- 
laws which  shall  cede  away,  control,  or  embarrass 
their  legislative  or  governmental  powers,  or  which 
shall  disable  them  from  performing  their  public  du- 
ties.'" 

The  right  to  exercise  the  police  power  is  a  contin- 
uing one  and  may  be  invoked  at  any  time  that  the 
public  health  or  convenience  requires  it,  and  can  not 
be  contracted  away  by  the  municipality  even  for  a 
valuable  consideration,  for  as  the  court  in  the  case  of 
Roanoke  Gas  Co.  v.  Roanoke.  88  Va.  810,  14  S.  E. 
665,  decided  in  1892,  says:  "Thus,  in  express  terms, 
the  legislature  conferred   upon  the   corporate   authori- 


§  413  PUBLIC    UTILITIES.  474 

ties  of  the  city  of  Roanoke  the  most  ample  powers  to 
grade  and  otherwise  improve  its  streets,  from  time  to 
time,  as  in  its  judgment  and  discretion  was  required 
for  the  safety  and  convenience  of  the  pubHc.  The 
powers  thus  delegated  are  continuing  and  inalienable. 
It  is  therefore  undeniable  that,  though  a  city  may  have 
agreed  for  a  valuable  consideration  to  allow  a  com- 
pany to  lay  gas  or  water  pipes  in  its  streets,  yet  if, 
in  the  exercise  of  its  authority  to  lower  the  grade  of 
and  to  remove  obstructions  from  its  streets,  the  pipes 
should  become  exposed,  so  as  to  obstruct  the  public 
in  the  safe  and  convenient  passage  along  them,  the 
municipal  authorities  may  of  right  either  require  such 
company  to  remove,  or  they,  by  their  servants,  may 
remove,  them  as  obstructions  and  nuisances." 

The  case  of  State;  Trenton  Horse  R.  Co.  v.  Tren- 
ton, 53  N.  J.  132,  20  Atl.  1076,  II  L.  R.  A.  410,  decided 
in  1890,  furnishes  an  interesting  distinction  between 
the  right  of  the  municipality  to  exercise  the  police 
power  over  private  individuals  and  corporations,  for 
the  reason  that  the  corporation  being  a  creature  of  the 
state  sometimes  has  conferred  upon  it  by  its  charter, 
rights  not  possessed  by  the  individual  which  the  mu- 
nicipality must  respect,  for  as  the  court  says:  "It  is 
indeed  true  that  the  power  of  police  regulation  by 
municipal  corporations  of  corporations  is  restrained 
within  narrower  limits  than  its  power  over  persons. 
This  difference  does  not  arise  from  any  lack  of  power 
in  the  legislature  to  exert  directly  or  to  delegate  to 
municipalities  the  power  to  exert  the  same  control 
over  each.  It  springs  out  of  the  circumstance  that 
corporations,  as  the  creatures  of  legislation,  have  often 
accompanying  the  grant  of  its  franchise  a  grant  of 
special  powers  and  privileges,  coupled  with  limitations 
upon  the  right  of  municipal  interference.  The  munici- 
pal legislation  can  not  by  any  regulation  of  its  own 


475  STREETS   AND    HIGHWAYS.  §  413 

abridge  the  privilege  thus  conferred,  or  infringe  upon 
the  limitations  thus  prescribed.  This  is  so  because  the 
act  of  incorporation  is  a  law  of  the  state,  and  because 
any  by-law  which  runs  counter  to  any  law,  whether 
organic  or  legislative,  is  void.  The  power  to  regulate 
still  exists,  but  in  these  instances  the  legislature  itself 
chooses  to  directly  exercise  the  power  or  to  fix  the 
limits  within  which  it  may  be  exercised  by  cities." 

That  the  municipality  is  not  bound  by  its  agree- 
ment to  pay  the  cost  of  removing  or  relocating  the 
equipment  of  a  municipal  public  utility  in  connection 
with  the  change  in  grade  of  its  streets  or  the  installa- 
tion of  its  sewer  system  because  this  expense  must  be 
borne  by  the  municipal  public  utility  itself  is  expressed 
in  the  case  of  Anderson  v.  Fuller,  51  Fla.  380,  41  So. 
684,  6  L.  R.  A.  (N.  S.)  1026,  decided  in  1906,  where 
the  court  says:  "The  city  of  Tampa  was,  therefore, 
not  authorized  directly  or  indirectly  to  burden  itself 
or  its  citizens  with  the  cost  of  removing  and  replacing 
of  the  water  pipes,  gas  pipes,  telegraph,  telephone, 
and  electric  light  poles,  drains,  conduits,  or  railway 
tracks  that  might  necessarily  have  been  interfered  with 
in  laying  its  sewers  in  the  streets." 


CHAPTER  XXI. 

THE  RIGHT  TO  FIX  RATES. 

Section. 

414.  Property   devoted   to   public   use   subject  to   public   regulation 

and  control. 

415.  Control  of  state  over  its  corporations. 

416.  Regulation  of  rates  for  municipal  public  utilities. 

417.  Competition  not  sufficient  regulation. 

418.  Delegation  of  power  of  regulation  must  be  clearly  intended. 

419.  Power  of  municipal   regulation  governmental,  continuous  and 

personal. 

420.  Municipal  regulation  from  control  of  its  streets. 

421.  Control   as  condition   of  granting  municipal  consent   or  fran- 

chise. 

422.  Power   of  municipal   regulation   plenary  and   complete. 

423.  Municipal  ordinance  fixing  rate  is  binding. 

424.  Rate  regulation  suspended  by  contract  fixing  rate. 

425.  Municipal  officers  competent  to  fix  rates  and  disinterested. 

426.  Express  contract  for  reasonable   period   fixing  rates   is  valid. 

427.  Power  to  contract  gives  power  to  fix  rates  until  revoked. 

428.  Power  to  grant  municipal  franchise  rights  on  conditions  con- 

strued liberally. 

429.  Individual  inhabitant  can  enforce  franchise  rights. 

430.  Municipal   grant   of  monopoly   rights   may  be   conditioned   on 

control. 

431.  Acceptance  of  municipal  consent  on  conditions  creates  bind- 

ing contract. 

432.  Service  must  be  provided  according  to  terms  of  contract. 

433.  Failure  of  municipality  to  provide  rate  in  franchise. 

434.  Regulation   of  streets  not   authority  to  regulate   rates   during 

franchise. 

435.  Power  of  municipality  to  regulate  rates  not  provided  in  fran- 

chise— police  regulations. 

436.  Power  to  contract  and  to  regulate  distinguished. 

437.  Rates  fixed  by  agreement  of  parties  binding. 

438.  Limitation  of  police  power. 

§  414.     Property  devoted  to  public  use  subject  to 
public  regulation  and  control. — The  rule  of  law  is  now 
universally  accepted  that  when  private  property  is  de- 
476 


477  RIGHT    TO    FIX    RATES.  §415 

voted  to  a  public  use  it  is  subject  to  public  regulation 
and  control.  In  recognition  of  this  doctrine  and  as 
furnishing  a  forceful  definition  and  a  current  applica- 
tion of  it  to  modern  industrial  conditions  for  the  pur- 
pose of  controlling  public  service  corporations  provid- 
ing any  public  utility  service,  the  leading  and  most 
important  case  is  that  of  Munn  v.  Illinois,  94  U.  S. 
113,  24  L.  ed.  'jy.  Under  this  decision  property  is 
clothed  with  a  public  interest  and  devoted  to  a  public 
use  when  used  in  a  manner  to  make  it  of  public  con- 
sequence, and  to  afifect  the  entire  community,  so  that 
when  one  devotes  property  to  a  use  in  which  the  pub- 
lic has  an  interest,  he  virtually  grants  to  the  public 
an  interest  in  that  use,  and  submits  it  to  public  regu- 
lation and  control  for  the  common  good  to  the  extent 
of  the  interest  so  granted. 

§415.     Control  of  state  over  its  corporations. — It 

is  evident  that  when  the  state  in  the  exercise  of  its 
sovereign  power  grants  a  charter,  conferring  the  privi- 
lege of  existing  and  operating  as  a  legal  entity  upon 
the  united  interests  of  a  number  of  individuals  and 
constituting  them  a  body  corporate,  such  a  grant  of 
special  rights  and  privileges  can  be  made  subject  to 
such  conditions  and  regulations  as  the  state  may  see 
fit  to  impose  within  constitutional  limitations.  Being 
the  creature  of  statutory  origin,  the  corporation  pos- 
sesses only  the  powers  given  by  such  origin  upon  the 
conditions  stipulated  by  the  state;  and  where  the 
power  to  alter,  amend  or  repeal  is  reserved  in  connec- 
tion with  the  granting  of  the  charter,  such  power  may 
be  exercised  at  any  time  thereafter  without  impairing 
the  obligation  of  contracts,  prohibited  by  our  federal 
constitution,  because  the  contract  resulting  from  the 
acceptance  of  the  franchise  is  made  subject  to  such 
modification  or  rescission. 


§  41 6  PUBLIC    UTILITIES.  478 

§  416.  Regulation  of  rates  for  municipal  public 
utilities. — As  stated  by  the  Supreme  Court  of  Indiana 
in  the  case  of  Hockett  v.  State,  105  Ind.  250,  5  N.  E. 
178,  55  Am.  Rep.  201,  "The  power  of  a  state  legisla- 
ture to  prescribe  the  maximum  charges  which  a  tele- 
phone company  may  make  for  services  rendered, 
facilities  afforded,  or  articles  of  property  furnished 
for  use  in  its  business,  is  plenary  and  complete."  In- 
deed, it  is  settled  beyond  question  that  in  the  absence 
of  any  express  constitutional  reservation,  such  corpo- 
rations as  furnish  municipal  public  utilities  are  so  af- 
fected by  a  public  use  as  to  be  subject  to  legislative 
regulation  and  control,  within  constitutional  limita- 
tions, which  clearly  and  necessarily  includes  the  right 
to  fix  or  regulate  the  rates  which  may  be  charged 
for  their  services.^ 

§417.      Competition     not     sufficient     regulation. — 

While  holding  that  competition  as  an  agency  of  con- 
trol and  regulation  has  great  value  in  securing  the 
public  advantage  and  conserving  the  public  interests 
in  those  cases  where  municipal  public  utilities  are 
operated  by  private  capital,  the  courts  have  at  the 
same  time  felt  that  it  is  unwise  to  depend  upon  this 
means  of  control  alone.  They  have  therefore  endeav- 
ored to  secure  to  municipal  corporations  the  right  to 
regulate  and  control  the  service  rendered  at  the  hands 
of  private  capital  where  the  exercise  of  such  a  right 
would  be  consistent  with  the  private  property  and 
contract  rights  guaranteed  by  the  constitution  and 
with  the  general  principles  of  the  laws  defining  and 
regulating  the  powers  of  municipal  corporations. 

1  Spring  Valley  Water  Works  v.  Schottler,  110  U.  S.  347,  28  L. 
ed.  173;  Smyth  v.  Ames,  169  U.  S,  466,  42  L.  ed.  819;  Zanesville  v. 
Zanesville  Gas-Light  Co.,  47  Ohio  1,  23  N.  E.  55;  Chicago  Union 
Traction  Co.  v.  Chicago,  199  111.  484,  65  N.  E.  451,  59  L.  R.  A.  631; 
Ratcliff  V.  Wichita  Union  Stock  Yds.  Co.,  74  Kans.  1,  86  Pac.  150, 
•6  L.  R.  A.  (N.  S.)  834. 


479  RIGHT    TO    FIX    RATES.  §  418 

§  418.  Delegation  of  power  of  regulation  must  be 
clearly  intended. — The  power  of  the  state  to  regulate 
municipal  public  utilities,  which  includes  the  power 
to  fix  and  control  the  maximum  rates  that  they  may 
charge  for  their  service,  however,  is  a  sovereign  power 
which  our  courts  hold  can  be  delegated  to  municipal 
corporations  only  in  express  terms  or  by  clear  or  nec- 
essary implication.  While  the  legislature  has  the  right 
to  fix  the  price  at  which  gas,  water,  electric  lights  or 
any  other  municipal  public  utility  service  shall  be 
supplied  by  one  who  enjoys  the  special  privilege  of 
providing  such  service  by  reason  of  the  grant  of  spe- 
cial franchise  rights  to  that  effect,  the  courts  will  not 
presume  that  such  a  right  is  vested  in  the  municipality 
unless  it  has  been  granted  by  the  legislature  expressly 
or  by  clear  implication.  The  right,  however,  may  be 
delegated  by  the  state  to  municipalities  or  other  agen- 
cies or  commissions  in  the  absence  of  a  constitutional 
limitation  to  that  effect  and  except  as  to  vested  in- 
terests and  valid  outstanding  contract  rights. 

§  419.  Power  of  municipal  regulation  governmen- 
tal, continuous  and  personal. — The  power  of  regulat- 
ing rates  is  public  and  governmental  in  its  nature,  and 
in  its  operation  and  effect  is  intended  to  redound  to 
the  benefit  and  advantage  of  the  municipality  and  its 
inhabitants  who  receive  the  municipal  public  utility 
service;  and  the  duty  of  regulating  the  service  and 
fixing  the  rates  when  delegated  to  the  municipality  is 
personal  and  fiduciary  in  its  nature  so  that  it  can  not 
be  surrendered  or  bartered  away  by  a  transfer  to  an- 
other or  by  a  contract  suspending  its  exercise  for  an 
unnecessary  or  an  unreasonable  period.  Indeed,  the 
power  is  a  continuing  one  and  is  not  exhausted  by 
its  exercise,  although  a  certain  rate  may  be  fixed  for 
a  reasonable  period  which  would  constitute  the  estab- 
lished rate  for  such  period,  and  unless  or  until  a  rate 


§  420  PUBLIC    UTILITIES.  480 

is  prescribed  by  the  state  or  an  agency  to  which  this 
power  may  have  been  delegated  the  municipal  public 
utility  may  fix  its  own  rates  for  its  service. 

§  420.  Municipal  regulation  from  control  of  its 
streets. — Where  the  state  has  not  delegated  its  right 
to  regulate  the  rates  for  municipal  public  utility  serv- 
ice to  the  municipality,  but  has  conferred  upon  it  full 
power  of  control  over  its  streets  and  authority  permit- 
ting it  to  provide  for  municipal  public  utility  service 
for  itself  and  its  inhabitants,  it  has  been  decided  in  a 
number  of  cases  of  well  recognized  authority  that,  in 
connection  with  the  granting  of  the  special  privilege 
to  install  and  operate  a  plant  providing  municipal  pub- 
lic utility  service  in  its  streets,  the  municipality  has 
the  power  to  fix  and  control  the  rates  by  making  this 
a  specification  of  the  contract  in  which  it  grants  to 
the  municipal  public  utility  the  special  privilege  of 
using  the  streets  and  furnishing  service  to  the  munici- 
pality and  its  inhabitants.  When  the  municipality  has 
conferred  upon  it  the  power  to  grant  the  use  of  its 
streets  on  such  terms  and  conditions  as  it  might  im- 
pose, it  is  only  reasonable  to  hold,  as  a  number  of 
courts  have  decided,  that  it  was  the  intention  of  the 
legislature  to  confer  upon  the  municipality  the  neces- 
sary power  to  protect  its  interests  and  to  conserve  the 
rights  of  its  inhabitants. 

§  421.  Control  as  condition  of  granting  municipal 
consent  or  franchise. — In  regulating  the  service  to  be 
provided  by  the  municipal  public  utility  and  the  rates 
to  be  charged  for  it,  it  is  of  the  utmost  importance 
to  the  public  and  to  the  consumer  of  the  service  that 
the  necessary  provisions  be  made  to  secure  adequate 
service  at  reasonable  rates  as  a  condition  of  the  con- 
sent   granted    by    the    municipality    to    the    uge    of    its 


481  RIGHT    TO    FIX    RATES.  §  422 

Streets  and  to  the  providing  by  the  municipal  pubHc 
utility  of  its  service.  So  that  the  city  has  ample 
power  to  regulate  the  service  and  control  the  rates 
of  municipal  public  utilities  in  its  ov^n  interest  and 
that  of  its  inhabitants  either  by  making  the  necessary 
provisions  for  doing  so  in  connection  with  the  grant- 
ing of  its  franchise  as  such  under  the  express  author- 
ity delegated  to  it  by  the  state  to  fix  the  rates  and  con- 
trol the  service  to  be  furnished  or,  if  there  is  no  ex- 
press authority  delegated  to  it  by  the  state  to  do  this, 
the  municipality  may  make  such  provisions  as  are  nec- 
essary to  regulate  the  service  and  fix  the  rates  by 
provisions  to  that  effect  in  the  contract  granting  its 
consent  to  the  municipal  public  utility  to  use  its  streets 
and  to  supply  its  service  within  the  municipality.  Hav- 
ing granted  the  franchise  in  the  one  instance  or  made 
these  stipulations,  conditions  to  the  giving  of  its  con- 
sent to  the  use  of  its  streets  in  the  other  case,  and 
the  municipal  public  utility  corporation  having  accepted 
the  franchise  or  agreed  to  the  conditions  and  having 
installed  its  plant  and  begun  to  furnish  its  service,  the 
municipality  has  thereby  fixed  the  rates  or  reserved 
to  itself  the  power  to  control  them  and  to  regulate  the 
service   of  any   particular  municipal   public  utility. 

§  422.  Power  of  municipal  regulation  plenary  and 
complete. — That  the  municipality  acting  under  au- 
thority expressly  or  by  clear  intention  conferred  upon 
it  by  the  state  to  regulate  and  control  the  service  of 
municipal  public  utilities  and  the  rates  to  be  charged 
for  it  has  the  power  and  the  responsibility  of  protect- 
ing itself  and  its  inhabitants  by  providing  for  adequate 
service  at  reasonable  rates  in  connection  with  its  grant 
of  the  special  franchise  by  virtue  of  which  the  munici- 
pal public  utility  acquires  the  right  to  install  its  sys- 
tem in   the   streets  of  the  municipality   and   to  supply 

31— Pub.  I't. 


§  422  PUBLIC    UTILITIES.  482 

its  service  is  the  generally  accepted  rule  as  stated  and 
illustrated  in  the  following  leading  cases  on  this  sub- 
ject.=^ 

CALIFORNIA.— Ex  parte  Russell,  163  Cal.  668,  126  Pac.   875. 

FEDERAL.— Cleveland  City  R.  Co.  v.  Cleveland,  94  Fed.  385; 
Los  Angeles  City  Water  Co.  v.  Los  Angeles,  88  Fed.  720;  Mills  v.  Chi- 
cago, 127  Fed.  731;  Omaha  Water  Co.  v.  Omaha,  147  Fed.  1;  Ft. 
Smith  Light  &  Traction  Co.  v.  Ft.  Smith,  202  Fed.  581. 

FLORIDA.— Gainesville  Gas  &  Electric  P.  Co.  v.  Gainesville,  63 
Fla.  425,  57  So.  785,  62  So.  919. 

ILLINOIS.— Chicago  Union  Traction  Co.  v.  Chicago,  199  111.  484, 
65  N.  E.  451,  59  L.  R.  A.  631;  Danville  v.  Danville  Water  Co.,  180 
111.  235,  54  N.  E.  224. 

INDIANA.— Indianapolis  v.  Consumers'  Gas  Trust  Co.,  140  Ind. 
107,  39  N.  E.  433;  Indianapolis  v.  Navin,  151  Ind.  139,  47  N.  E.  525, 
41  L.  R.  A.  337;  Lewisville  Natural  Gas  Co.  v.  State  ex  rel.,  135  Ind. 
49,  34  N.  E.  702,  21  L.  R.  A.  734;  Muncie  Natural  Gas  Co.  v.  Muncie, 
160  Ind.  97,  66  N.  E.  436,  60  L.  R.  A.  822;  Noblesville  v.  Noblesville 
Gas,  &c.,  Co.,  157  Ind.  162,  60  N.  E.  1032;  Richmond  v.  Richmond 
Natural  Gas  Co.,  168  Ind.  82,  79  N.  E.  1031;  Rushville  v.  Rushville 
Natural  Gas  Co.,  164  Ind.  162,  73  N.  E.  87;  Westfield  Gas  &  Milling 
Co.  V.  Mendenhall,  142  Ind.  538,  41  N.  E.  1033. 

KANSAS.— Pryor,  In  re,  55  Kans.  724,  41  Pac.  958,  29  L.  R.  A. 
398,  49  Am.  St.  280;  Emporia  v.  Emporia  Tel.  Co.  88  Kans.  443,  129 
Pac.  187;  133  Pac.  858;  State  ex  rel.  Atty.  Gen.  v.  Wyandotte 
County  Gas.  Co.  88  Kans.  165,  127  Pac.  639. 

MARYLAND.— Gregg  v.  Laird   (Md.),  87  Atl.  1111. 

MICHIGAN.— Boerth  v.  Detroit  City  Gas  Co.,  152  Mich.  654,  116 
N.  W.  628,  18  L.  R.  A.  (N.  S.)  1197. 

MISSOURI.— St.  Louis  v.  Bell  Tel.  Co.,  96  Mo.  623,  10  S.  W.  197; 
State  ex  rel.  Garner  v.  Missouri  &  K.  Tel.  Co.,  189  Mo.  83,  88  S.  W. 
41;  State  ex  rel.  St.  Louis  v.  Laclede  Gaslight  Co.,  102  Mo.  472,  14 
S.  W.  974,  22  Am.  St.  789. 

NEBRASKA.— W^abaska  Electric  Co.  v.  Wymore,  60  Nebr.  199, 
82  N.  W.  626. 

NEW  MEXICO.— Agua  Pura  Co.  v.  Las  Vegas,  10  N.  Mex.  6, 
60  Pac.  208,  50  L.  R.  A.  224. 

NEW  JERSEY.— Long  Branch  Commission  v.  Tintern  Manor 
Water  Co.,  70  N.  J.  Eq.  71,  62  Atl.  474. 

NEW  YORK.— Pond  v.  New  Rochelle  Water  Co.,  183  N.  Y.  330, 
76  N.  E.  211,  1  L.  R.  A.  (N.  S.)  961;  People  ex  rel.  New  York  Edison 
Co.  v.  Willcox,  207  N.  Y.  86,  100  N.  E.  705. 

OHIO.— Zanesville  v.  Zanesville  Gas-Light  Co.,  47  Ohio  1,  23  N. 
E.  55;  Zanesville  v.  Zanesville  Tel.  &  T.  Co.,  64  Ohio  67,  59  N.  E.  781. 

OKLAHOMA.— Shawnee  Gas  &  Electric  Co.  v.  Corporation  Com- 
mission  (Okla.),  130  Pac.   127. 


483  RIGHT    TO    FIX    RATES.  §  423 

§  423.  Municipal  ordinance  fixing  rate  is  binding. 
— In  the  case  of  Cleveland  v.  Cleveland  City  R.  Co., 
194  U.  S.  517,  48  L.  ed.  1 102,  decided  in  1904,  under 
the  statutory  authority  conferred  upon  the  plaintiff 
city  to  contract  for  street  railway  service,  the  court  in 
holding  the  municipality  had  the  power  to  fix  the  rate 
for  such  service  by  ordinance  which  on  acceptance  by 
the  municipal  public  utility  became  a  contract  said: 
"In  reason,  the  conclusion  that  contracts  were  engen- 
dered would  seem  to  result  from  the  fact  that  the  pro- 
visions as  to  rates  of  fare  were  fixed  in  ordinances  for 
a  stated  time  and  no  reservation  was  made  of  a  right 
to  alter;  that  by  those  ordinances  existing  rights  of 
the  corporations  were  surrendered,  benefits  were  con- 
ferred upon  the  public,  and  obligations  were  imposed 
upon  the  corporations  to  continue  those  benefits  dur- 
ing the  stipulated  time." 

SOUTH  CAROLINA.— Charleston  Consol.  Ry.  &c.  Co.  v.  Charles- 
ton, 92  S.  Car.  127,  75  S.  E.  390. 

TENNESSEE.— Knoxville  v.  Knoxville  Water  Co.,  107  Tenn.  647, 
64  S.  W.  1075,  61  L.  R.  A.  888. 

TEXAS.— Ball  V.  Texarkana  Water  Corp.,  —  Tex.  Civ.  App.  — , 
127  S.  W.  1068. 

UNITED  STATES.— Blair  v.  Chicago,  201  U.  S.  400,  50  L.  ed.  801; 
Cleveland  v.  Cleveland  City  R.  Co.,  194  U.  S.  517,  48  L.  ed.  1102; 
Detroit  v.  Detroit  Citizens'  St.  R.  Co.,  184  U.  S.  368,  46  L.  ed.  592; 
Knoxville  Water  Co.  v.  Knoxville,  189  U.  S.  434,  47  L.  ed.  887;  Los 
Angeles  v.  Los  Angeles  City  Water  Co.,  177  U.  S.  55S,  44  L.  ed.  886; 
Murray  v.  Pocatello,  226  U.  S.  318,  57  L.  ed.;  New  Orleans  Gas- 
light Co.  v.  Louisiana  Light,  &c.,  Mfg.  Co.,  115  U.  S.  650,  29  L.  ed. 
516;  San  Diego  Land  &  Town  Co.  v.  National  City,  174  U.  S.  739, 
43  L.  ed.  1154;  Spring  Valley  Waterworks  v.  Schottler,  110  U.  S. 
347,  28  L.  ed.  173;  Minneapolis  v.  Minneapolis  Street  Ry.  Co.,  215 
U.  S.  417,  54  L.  ed.  259. 

UTAH.— Brummitt  v.  Ogden  Waterworks  Co.,  33  Utah  2S9.  93 
Pac.  828. 

WASHINGTON.— Tacoma  Gas  &  Electric  Co.  v.  Tacoma,  14 
Wash.  288,  44  Pac.  655. 

WEST  VIRGINIA.— St.  Mary's  v.  Hope  Natural  Gas  Co. 
(W.  Va.),  76  S.  E.  841. 

WISCONSIN.— State  ex  rel.  Wisconsin  Tel.  Co.  v.  Sheboygan,  111 
Wis.  23,  86  N.  W.  657. 


§  424  PUBLIC    UTILITIES.  484 

§  424.  Rate  regulation  suspended  by  contract  fix- 
ing rate. — The  same  court  in  the  case  of  Detroit  v. 
Detroit  Citizens'  St.  R.  Co.,  184  U.  S.  368,  46  L.  ed. 
592,  decided  in  1902,  in  a  similar  case  said:  "It  may 
be  conceded  that  clear  authority  from  the  legislature 
is  needed  to  enable  the  city  to  make  a  contract  or 
agreement  like  the  ordinance  in  question,  including 
rates  of  fare.  But  there  can  be  no  question  in  this 
court  as  to  the  competency  of  a  state  legislature, 
unless  prohibited  by  constitutional  provisions,  to  au- 
thorize a  municipal  corporation  to  contract  with  a 
street  railway  company  as  to  the  rates  of  fare,  and  so 
to  bind  during  the  specified  period  any  future  common 
council  from  altering  or  in  any  way  interfering  with 
such  contract.  New  Orleans  Gaslight  Co.  v.  Louisiana 
Light,  &c.,  Co.,  115  U.  S.  650,  29  L.  ed.  516;  New 
Orleans  Waterworks  Co.  v.  Rivers,  115  U.  S.  683,  29 
L.  ed.  525;  St.  Tammany  Waterworks  Co.  v.  New 
Orleans  Waterworks  Co.,  120  U.  S.  64,  30  L.  ed.  563; 
Walla  Walla  v.  Walla  Walla  Water  Co.,  172  U.  S.  i, 
43  L.  ed.  34;  Los  Angeles  v.  Los  Angeles  City  Water 
Co.,  177  U.  S.  558,  44  L.  ed.  886;  Freeport  Water  Co. 
V.  Freeport,  180  U.  S.  587,  45  L.  ed.  679.  The  con- 
tract once  having  been  made,  the  power  of  the  city 
over  the  subject,  so  far  as  altering  the  rates  of  fare 
or  other  matters  properly  involved  in  and  being  a  part 
of  the  contract  is  suspended  for  the  period  of  the  run- 
ning of  the  contract." 

The  same  court  in  the  case  of  San  Diego  Land  & 
Town  Co.  V.  National  City,  174  U.  S.  739,  43  L.  ed. 
1154,  decided  in  1899,  observed:  "That  it  was  com- 
petent for  the  state  of  California  to  declare  that  the 
use  of  all  water  appropriated  for  sale,  rental,  or  dis- 
tribution should  be  a  public  use,  and  subject  to  public 
regulation  and  control,  and  that  it  could  confer  upon 
the    proper    municipal    corporation    power    to    fix    the 


485  RIGHT    TO    FIX    RATES.  §  425 

rates  of  compensation  to  be  collected  for  the  use  of 
water  supplied  to  any  city,  county,  or  town,  or  to  the 
inhabitants  thereof,  is  not  disputed,  and  is  not,  as  we 
think,  to  be  doubted." 

§  425.  Municipal  officers  competent  to  fix  rates 
and  disinterested, — The  case  of  Spring  Valley  Water 
Works  V.  Schottler,  no  U.  S.  347,  28  L.  ed.  173,  de- 
cided in  1884,  is  a  leading  one  to  the  same  effect  and 
is  also  of  interest  in  this  connection  in  deciding  that 
the  municipal  officers  of  any  particular  municipality 
are  not  incompetent  to  fix  the  rates  for  municipal  pub- 
lic utility  service  to  be  furnished  within  its  limits,  al- 
though the  municipality  is  an  interested  party  in  the 
matter  because  it  is  a  logical  and  necessary  part  of 
their  official  duty.  The  court  says:  "Long  before 
the  constitution  of  1879  was  adopted  in  California, 
statutes  had  been  passed  in  many  of  the  states  requir- 
ing water  companies,  gas  companies,  and  other  com- 
panies of  like  character,  to  supply  their  customers  at 
prices  to  be  fixed  by  the  municipal  authorities  of 
the  locality;  and,  as  an  independent  proposition,  we 
see  no  reason  why  such  a  regulation  is  not  within  the 
scope  of  legislative  power,  unless  prohibited  by  con- 
stitutional limitations  or  valid  contract  obligations. 
Whether  expedient  or  not,  is  a  question  for  the  legis- 
lature, not  the  courts. 

'Tt  is  said,  however,  that  appointing  municipal  offi- 
cers to  fix  prices  between  the  seller  and  the  buyers  is, 
in  effect,  appointing  the  buyers  themselves,  since 
the  buyers  elect  the  officers,  and  that  this  is  a  viola- 
tion of  the  principle  that  no  man  shall  be  a  judge  in 
his  own  case.  But  the  officers  here  selected  are  the 
governing  board  of  the  municipality,  and  they  are  to 
act  in  their  official  capacity  as  such  a  board  when 
performing   the    duty    which    has    been    imposed    upon 


§  4^6  PUBLIC    UTILITIES.  486 

them.  Their  general  duty  is,  within  the  limit  of  their 
powers,  to  administer  the  local  government,  and,  in 
so  doing,  to  provide  that  all  shall  so  conduct  them- 
selves and  so  use  their  own  property  as  not  unneces- 
sarily to  injure  others.  They  are  elected  by  the  peo- 
ple for  that  purpose,  and  whatever  is  within  the  just 
scope  of  the  purpose  may  properly  be  intrusted  to 
them  at  the  discretion  of  the  legislature." 

§  426.  Express  contract  for  reasonable  period  fix- 
ing rates  is  valid. — Where  the  municipality  has  power 
expressly  conferred  upon  it  to  contract  for  municipal 
public  utility  service,  the  municipality  in  the  exercise 
of  such  a  right  for  the  purpose  of  securing  the  desired 
service  by  agreeing  on  a  fixed  rate  for  a  reasonable 
period  may  thereby  suspend  its  right  to  regulate  the 
rates  further  during  that  period;  provided,  however, 
the  agreement  to  that  effect  is  made  expressly,  for  as 
the  court  in  the  case  of  Omaha  Water  Co.  v.  Omaha, 
147  Fed.  I,  decided  in  1906,  says:  "The  making  of 
a  contract  for  the  construction  and  operation  of  water- 
works wherein  the  parties  agree  what  rates  may  be 
collected  by  the  owner  of  the  works  from  private  con- 
sumers during  a  reasonable  term  of  years  is  the  exer- 
cise of  one  of  the  business  powers  of  the  corporation. 
The  purpose  of  such  a  contract  is  not  to  regulate  rates, 
for  there  are  no  rates  to  regulate.  It  is  to  procure 
water  and  to  get  rates  for  the  city  and  for  its  inhab- 
itants. Hence,  it  is  that  the  legislature  of  a  state, 
unless  prohibited  by  its  constitution,  may  empower  a 
city  to  suspend  by  contract,  and  a  city  may  suspend 
in  that  way  during  a  reasonable  term  of  years  its 
power  to  change  or  regulate  the  rates  which  an  indi- 
vidual or  corporation  may  collect  of  private  consumers, 
.  .  .  An  agreement  for  such  a  suspension  will  not 
be   raised  by   mere   implication.     Where   the   meaning 


487  RIGHT    TO    FIX    RATES.  §  427 

of  a  grant  or  contract  regarding  such  a  suspension  or 
regarding  any  public  franchise  or  privilege  is  ambig- 
uous or  doubtful,  it  will  be  construed  favorably  to  the 
rights  of  the  public.  Where  the  grant  or  the  contract 
is  clear  and  plain  it  will  be  protected  and  enforced." 

§  427.  Power  to  contract  gives  power  to  fix  rates 
until  revoked. — That  the  power  conferred  upon  the 
municipality  to  supply  itself  with  the  service  of  any 
particular  municipal  public  utility  includes  the  power 
to  agree  upon  a  rate  by  contract  and  that  such  power 
being  delegated  by  statutory  authority  may  be  revoked 
at  the  will  of  the  legislature  is  the  effect  of  the  deci- 
sion in  the  case  of  Los  Angeles  City  Water  Co.  v.  Los 
Angeles,  88  Fed.  720,  decided  in  1898,  where  the  court 
says:  "In  procuring  water,  or  any  other  commodity, 
by  purchase,  one  of  the  first  things  to  be  considered 
and  agreed  upon  is  the  matter  of  price.  Therefore, 
to  hold  that  general  power,  without  limitation,  in  a 
municipal  corporation,  to  supply  the  city  with  water, 
does  not  include  power  to  agree  upon  price,  it  seems 
to  me,  would  be  a  solecism.  .  .  .  This  delegation 
of  power  to  the  city  was  not,  of  course,  a  relinquish- 
ment by  the  legislature  of  its  control  over  the  subject. 
The  legislature  could  at  any  time  revoke  the  power 
delegated  to  the  city,  and  provide  directly,  through 
agencies  of  its  own  selection,  for  supplying  the  city 
with  water,  provided  such  revocation  or  provision 
should  not   impair  any  previously  vested  rights." 

§  428.  Power  to  grant  municipal  franchise  rights 
on  conditions  construed  liberally. — Under  the  author- 
ity conferred  upon  the  municipality  to  impose  such 
terms  and  conditions  as  it  sees  fit  in  granting  its  con- 
sent to  the  use  of  its  streets  for  a  municipal  public 
utility,  the  courts  are  very  liberal  in  permitting  such 


§  429  PUBLIC    UTILITIES.  488 

municipalities  to  impose  conditions  practically  with- 
out limitation  so  far  as  they  are  not  in  conflict  with 
other  statutory  or  constitutional  provisions.  The 
power  to  fix  rates  for  the  service  to  be  rendered  has 
been  frequently  held  to  be  properly  included  within 
such  authority,  for  as  the  court  in  the  case  of  Boerth 
V.  Detroit  City  Gas  Co.,  152  Mich.  654,  116  N.  W. 
628,  18  L.  R.  A.  (N.  S.)  1197,  decided  in  1908,  said: 
"It  may  be  said  then,  that,  in  order  to  safeguard  the 
rights  of  its  inhabitants  who  use  gas,  it  is  not  only 
reasonable  that  the  city  should  have  this  power  to 
fix  rates,  but  it  is  highly  expedient — indeed,  it  is  nec- 
essary— that  it  should  possess  that  power.  .  .  .  The 
power  to  prescribe  rates  by  contract — and  that  is  the 
power  which  was  exercised  in  this  case — is  a  very 
different  power  from  the  legislative  power  regulating 
rates." 

§  429,  Individual  inhabitant  can  enforce  franchise 
rights. — The  Supreme  Court  of  New  York  in  the  case 
of  Pond  V.  New  Rochelle  Water  Co.,  183  N.  Y.  330, 
y6  N.  E.  211,  I  L.  R.  A.  (N.  S.)  961,  decided  in  1906, 
held  that  the  individual  inhabitant  has  the  right  in  his 
own  name  to  compel  the  municipal  public  utility  to 
provide  him  service  .at  the  rate  fixed  in  the  franchise 
which  stipulated  the  rate  to  be  charged  for  the  service 
rendered  to  the  individual  inhabitant  as  well  as  to  the 
municipality  itself.  In  the  course  of  its  opinion  the 
court  said:  'Tn  the  case  before  us  we  have  a  munici- 
pality entering  into  a  contract  for  the  benefit  of  its 
inhabitants,  the  object  being  to  supply  them  with  pure 
and  wholesome  water  at  reasonable  rates.  .  .  .  The 
municipality  sought  to  protect  its  inhabitants,  who 
were  at  the  time  of  the  execution  of  the  contract  con- 
sumers of  water,  and  those  who  might  thereafter  be- 
come   so,    from    extortion    by    a    corporation    having 


489  RIGHT    TO    FIX    RATES.  §  43O 

granted  to  it  a  valuable  franchise  extending  over  a 
long  period  of  time.  We  are  of  opinion  that  the  com- 
plaint states  a  good  cause  of  action." 

§  430.  Municipal  grant  of  monopoly  rights  may 
be  conditioned  on  control. — That  no  such  statutory 
authority  is  necessary  to  give  the  municipality  power 
to  fix  the  rates  and  regulate  the  service  to  be  ren- 
dered, but  that  it  may  make  such  provisions  condi- 
tions precedent  to  the  granting  of  its  consent  to  the 
use  of  its  streets  and  to  the  furnishing  of  service  to 
its  inhabitants  by  any  particular  municipal  public  util- 
ity, is  a  well  established  principle  which  must  be  in- 
voked to  secure  the  necessary  protection  in  those 
municipalities  where  the  express  authority  to  fix  rates 
has  not  been  conferred,  for  as  the  court  in  the  case  of 
Long  Branch  Commission  v.  Tintern  Manor  Water 
Co.,  70  N.  J.  Eq.  71,  62  Atl.  474,  decided  in  1905,  said: 
"But,  independent  of  such  statutory  provision,  I  think 
it  is  the  province  and  the  duty  of  the  municipality, 
whenever  opportunity  offers,  to  exercise  its  power  in 
the  protection  of  its  inhabitants  against  extortion,  and 
to  secure  them  a  supply  of  water  and  of  gas  from 
corporations,  assuming  to  furnish  those  commodities, 
at  reasonable  rates.  The  water  company  is  exercising 
a  public  franchise,  which,  from  its  nature  and  mode  of 
exercise,  is  necessarily,  during  its  continuance,  a  prac- 
tical monopoly,  and  it  follows  beyond  all  question  that 
its  charges  for  its  supply  must  be  reasonable.  And  it 
would  be  strange,  indeed,  if  the  municipal  govern- 
ment, which,  so  to  speak,  imposes  this  monopoly  upon 
its  citizens,  were  powerless  to  protect  them  against 
unreasonable  charges." 

§431.  Acceptance  of  municipal  consent  on  condi- 
tions creates  binding  contract. — Where  the  municipal- 


§  432  PUBLIC    UTILITIES.  49O 

ity  has  the  right  to  withhold  its  consent  or  extend  it 
at  will  it  has  ample  power  to  make  all  necessary  pro- 
visions for  securing  adequate  service  at  reasonable 
rates,  for  as  the  court  in  the  case  of  Indianapolis  v. 
Consumers'  Gas  Trust  Co.,  140  Ind.  107,  39  N.  E.  433, 
decided  in  1895,  says:  "It  was  within  its  discretion 
to  give  or  not  to  give  its  consent,  and  it  had  the  right 
to  withhold  it  from  all  gas  companies.  Gas  &  Min. 
Co.  V.  Town  of  Elwood,  114  Ind.  332,  16  N.  E.  624. 
It  was  not  limited  alone  to  the  granting  of  this  fran- 
chise, but  it  had  the  right  to  prescribe  and  impose 
terms  and  conditions.  Dill.  Mun.  Corp.  §  706;  2 
Wood,  Ry.  Law,  p.  986;  EUiott,  Roads  &  S.  p.  565. 
When  these  terms  and  conditions  proposed  by  appel- 
lant were  accepted  by  the  appellee,  and  complied  with, 
it  became  a  binding  contract.  Western  P.  &  S.  Co. 
V.  Citizens'  St.  R.  Co.,  128  Ind.  531,  26  N.  E.  188,  and 
28  N.  E.  88." 

§  432.  Service  must  be  provided  according  to 
terms  of  contract. — After  the  municipal  public  utility 
has  accepted  the  consent  of  the  municipality  on  the 
conditions  specified  and  instaled  its  service,  the  con- 
tract is  consummated,  and  where  the  conditions  pro- 
vide for  the  fixing  of  the  rate  it  is  a  material  part  of 
the  contract  and  absolutely  binding  on  the  municipal 
public  utility,  for  as  the  court  in  the  case  of  Westfield 
Gas  &  Mining  Co.  v.  Mendenhall,  142  Ind.  538,  41  N. 
E.  1033,  says :  "The  town  had  the  right,  in  granting 
the  use  of  its  streets,  to  impose  such  reasonable  re- 
quirements, terms,  regulations,  and  conditions  therein 
upon  those  accepting  the  privileges  and  benefits  of  the 
grant  as  its  own  prudence  and  discretion  might  dic- 
tate, so  as  not  to  restrict,  however,  the  town  in  its 
legitimate  exercise  of  legislative  powers.  The  author- 
ity to  prescribe  such  terms  and  conditions,  if  not  ex- 


491  RIGHT    TO    FIX    RATES.  §  433 

pressly  conferred  by  the  act  of  1887,  may  at  least  be 
reasonably  inferred  therefrom,  in  order  that  the  full 
force  and  effect  may  be  given  to  the  power  expressly 
granted.  City  of  Crawfordsville  v.  Braden,  130  Ind. 
149,  28  N.  E.  849;  City  of  Indianapolis  v.  Consumers' 
Gas  Trust  Co.,  140  Ind.,  107,  39  N.  E.  433,  and  author- 
ities there  cited.  .  .  .  Having  accepted  the  fran- 
chise granted  by  the  ordinance,  and  agreed  to  be 
bound  by  the  express  terms  as  to  the  price  of  gas,  and 
having  engaged  in  the  exercise  of  the  privileges  under 
the  grant,  and  so  continuing  to  do,  it  is  now  precluded 
from  successfully  refusing  to  discharge  its  obligations 
to  the  inhabitants  of  the  town  who  desire  to  use  its 
fuel  upon  the  ground  that  they  refuse  to  pay  a  price 
therefor  in  excess  of  the  maximum  rate  fixed  by  the 
ordinance.  The  town  could  not,  by  its  subsequent 
action,  impair  or  restrict  the  rights  granted  to,  ac- 
cepted, and  exercised  by  appellant.  Neither  will  the 
latter  be  permitted,  under  the  circumstances,  to  de- 
cline to  comply  with  the  terms  or  conditions  as- 
sumed, by  which  it  is  expressly  obligated." 

§  433.  Failure  of  municipality  to  provide  rate  in 
franchise. — The  case  of  In  re  Pryor,  55  Kans.  724,  41 
Pac.  958,  29  L.  R.  A.  398,  49  Am.  St.  280,  decided  in 
1895,  suggests  the  practical  importance  of  this  prin- 
ciple. Nine  years  after  granting  a  franchise  to  erect 
and  maintain  a  gas  system  within  its  limits,  without 
having  made  any  provision  as  to  the  rates  to  be 
charged  for  the  supply  of  such  gas  for  domestic  pur- 
poses, upon  which  grant  gas  works  were  duly  in- 
stalled, the  city  of  lola,  Kansas,  passed  an  ordinance 
fixing  the  maximum  rates  to  be  charged  for  such 
service  at  much  less  than  those  theretofore  charged. 
In  denying  the  validity  of  this  ordinance  attempting 
to  fix  the  rates  for  such  service  the  court  said:     "The 


§  433  PUBLIC    UTILITIES.  492 

act  providing  for  the  organization  and  government  of 
cities  of  the  third  class  [to  which  lola  belonged], 
contains  no  express  grant  of  power  to  fix  or  regulate 
the  prices  of  gas,  water  or  any  other  article  of  neces- 
sity or  luxury.  .  .  .  Certainly  there  is  no  express 
authority  conferred  upon  the  municipal  authorities  by 
this  section  to  regulate  the  price  of  gas  or  water 
[providing  general  powers  in  corporations  to  provide 
cities  with  gas  or  water  'with  the  consent  of  the  mu- 
nicipal authorities  thereof,  and  under  such  regulations 
as  they  may  prescribe.']  Whether  they  might  as  a 
condition  of  their  consent,  provide  that  gas  or  water 
should  be  furnished  to  the  city  or  to  its  inhabitants 
at  not  exceeding  certain  prescribed  rates,  we  do  not 
now  inquire.  Consent  was  granted  by  ordinance  No. 
268,  to  the  lola  Gas  and  Coal  Company,  its  successors 
and  assigns  [of  whom  petitioner  is  assignee]  without 
annexing  any  condition  as  to  rates.  ...  In  certain 
cases  the  state  may  fix  and  regulate  the  prices  of  com- 
modities and  the  compensation  for  services,  but  this 
is  a  sovereign  power,  which  may  not  be  delegated  to 
cities  or  subordinate  subdivisions  of  the  state,  except 
in  express  terms  or  by  necessary  implication.  No 
such  power  is  expressly  conferred  upon  the  cities  of 
the  third  class,  and  we  do  not  think  the  right  can  be 
implied  from  any  express  provision,  unless  possibly 
that  in  the  grant  of  consent  to  any  person  or  corpora- 
tion so  to  use  the  streets  and  public  grounds  of  the 
city  a  condition  might  be  imposed  as  to  the  maximum 
rates  to  be  charged. 

The  case  of  Wabaska  Electric  Co.  v.  Wymore,  60 
Neb.  199,  82  N.  W.  626,  decided  in  1900,  was  an  action 
to  restrain  the  enforcement  of  an  ordinance  reducing 
rates  for  electric  light  furnished  by  the  plaintiff  under 
a  franchise  from  the  defendant  city,  which  failed  to 
stipulate  the  rates  to  be  charged,  where  the  court  said: 


493  RIGHT    TO    FIX    RATES.  §  434 

"In  dealing  with  this  feature  of  the  case  it  is  not  neces- 
sary to  determine  whether  the  city  was  authorized  by 
its  charter,  as  it  existed  in  1889,  to  grant  any  person, 
company  or  corporation,  an  exclusive  franchise  for 
the  erection  and  operation  of  an  electric  light  plant. 
The  plant  has  come  into  being;  it  is  now  established, 
and  the  owner  thereof  has  the  right  to  furnish  light 
to  its  private  customers  on  such  terms  as  may  be 
mutually  satisfactory  to  the  parties  concerned.  The 
defendant  has  plainly  no  power  or  authority  to  regu- 
late the  plaintiff's  charges  for  lights  furnished  to  the 
inhabitants  of  Wymore.  The  legislature  has,  of  course, 
the  right  to  fix  the  price  at  which  gas  or  electric  lights 
shall  be  supplied  by  one  who  enjoys  a  monopoly  of 
the  business  by  reason  of  having  an  exclusive  fran- 
chise ;  and  such  right  may  be  delegated  to  the  gov- 
erning body  of  a  public  or  municipal  corporation.  But 
the  power  of  regulating  the  charges  for  electric  lights 
is  not  found  among  the  grant  of  powers  contained  in 
defendant's  charter.  There  is  no  such  authority  given, 
either  expressly  or  by  implication  and,  therefore,  it 
does  not  exist." 

§  434.  Regulation  of  streets  not  authority  to  regu- 
late rates  during  franchise. — The  same  principle  is 
equally  well  established  and  applicable  to  the  giving 
of  telephone  service  in  municipalities,  which  has  prac- 
tically all  of  the  elements  of  a  natural  monopoly.  In 
the  early  case  of  St.  Louis  v.  Bell  Tel.  Co.,  96  Mo. 
623,  10  S.  W.  197,  decided  in  1888,  the  court  laid  down 
this  rule  of  law  as  follows:  "This  was  a  prosecution 
against  the  Bell  Telephone  Company  of  ^lissouri 
for  the  violation  of  an  ordinance,  which  provides 
that  the  annual  charge  for  the  use  of  the  telephone 
in  the  city  of  St.  Louis  shall  not  exceed  fifty  dol- 
lars.    .     .     .     The  important  question,  then,  is  whether 


§  435  PUBLIC    UTILITIES.  494 

the  city  of  St.  Louis  has  the  power  to  enact  the 
ordinance  in  question,  ...  If  the  city  has  such 
power  it  must  be  found  in  a  reasonable  and  fair 
construction  of  its  charter.  .  .  .  That  the  com- 
pany is  subject  to  reasonable  regulations  prescribed 
by  the  city,  as  to  planting  its  poles  and  stringing 
its  wires  and  the  like,  is  obvious.  Such  regulations 
have  been  obeyed  by  this  defendant.  Conceding 
all  this,  we  are  at  a  loss  to  see  what  this  power  to 
regulate  the  use  of  the  streets  has  to  do  with  the  power 
to  fix  telephone  charges.  The  power  to  regulate  the 
charges  for  telephone  service  is  neither  included  in 
nor  incidental  to  the  power  to  regulate  the  use  of 
streets,  and  the  ordinance  can  not  be  upheld,  on  any 
such  ground.  .  .  .  The  power  to  regulate,  it  may 
be  conceded,  gives  the  city  the  right  to  make  police 
regulations  as  to  the  mode  in  which  the  designated 
employment  shall  be  exercised.  But  taking  these 
charter  provisions  together,  we  think  it  would  be  going 
to  an  extreme  length  to  say  that  they  confer  upon 
the  city  the  power  to  fix  telephone  rates.  .  .  .  We 
conclude  that  the  city  has  no  power  to  pass  the  ordi- 
nance in  question  by  reason  of  any  of  the  charter 
powers  before  considered.  .  .  .  To  say  that  under 
this  general  power  [of  the  general  welfare  clause] 
the  city  may  fix  rates  for  telephone  services  would  be 
going  entirely  too  far."  This  principle  was  fully  af- 
firmed by  the  same  court  in  1905  in  State  ex  rel. 
Garner  v.  Missouri  &  K.  Tel.  Co.,  189  Mo.  83,  88  S. 
W.  41- 

§  435-  Power  of  municipality  to  regulate  rates  not 
provided  in  franchise — Police  regulations. — This  same 
principle  with  reference  to  the  power  of  cities  to  regu- 
late the  rates  for  telephone  service  only  in  those  cases 
where  the  right  to  do  so  has  been  expressly  conferred 


495  RIGHT    TO    FIX    RATES.  §  435 

upon  the  municipality  or  can  be  necessarily  implied  from 
some  express  grant  by  the  state,  is  clearly  stated,  to- 
gether with  the  reason  on  which  the  rule  of  law  is  based 
in  the  case  of  State  ex  rel.  Wisconsin  Tel.  Co.  v. 
Sheboygan,  iii  Wis.  23,  86  N.  W.  657,  decided  in 
1901.  In  the  course  of  its  opinion  the  court  said: 
"Whatever  power  a  municipality  possesses  over  the 
wires  and  poles  of  a  telephone  company  in  its  streets 
must  be  granted  it  by  the  legislature — 2  Dillon,  Mun. 
Corp.,  §  698.  The  charter  of  the  city  of  Sheboygan 
empowers  it  to  enact  proper  ordinances  and  regula- 
tions for  the  government  and  good  order  of  the  city 
for  the  benefit  of  trade  and  commerce  for  the  sup- 
pression of  vice  and  the  prevention  of  crime,  to  prevent 
the  incumbering  of  streets,  to  provide  for  the  removal 
of  obstructions  therein,  to  regulate  the  manner  of 
using  streets,  and  to  protect  them  from  injury.  As 
we  have  already  seen,  this  grant  of  power  does  not 
authorize  the  city  to  wholly  prevent  the  relator  from 
doing  business  within  its  limits.  No  express  authority 
is  given  the  city  to  regulate  charges  for  telephone 
service,  nor  is  there  any  express  grant  of  power,  from 
which  such  authority  can  necessarily  be  implied. 
.  .  .  The  power  to  regulate  charges  was  not  in- 
cluded in  or  incidental  to  the  power  to  regulate  the 
manner  of  using  streets.  There  is  not  the  remotest 
relation  between  them.  The  attempt  of  the  city  to 
justify  its  position  on  that  ground  must  fail.  .  .  . 
Neither  does  the  power  come  to  the  city  under  the 
general  authority  to  pass  ordinances  for  the  govern- 
ment and  good  order  of  the  city  and  for  the  benefit 
of  trade  and  commerce.  To  say  that  under  this  gen- 
eral power  the  city  may  fix  rates  for  telephone  service 
would  be  going  entirely  too  far." 

The  Supreme  Court  of  Indiana  in  a  series  of  recent 


§  435  PUBLIC    UTILITIES.  496 

decisions  has,  firmly  established  in  that  state  this  prin- 
ciple as  to  the  municipal  regulation  of  rates  for  public 
utilities  in  connection  with  the  matter  of  supplying 
natural  gas  to  the  inhabitants  of  municipalities.  The 
first  case  of  Lewisville  Natural  Gas  Co.  v.  State  ex 
rel.,  135  Ind.  49,  34  N.  E.  702,  21  L.  R.  A.  734, 
decided  in  1893,  was  a  mandamus  action  to  compel 
the  appellant  company  to  furnish  gas  at  the  price 
fixed  by  an  ordinance  of  the  town  of  Lewisville  by 
the  terms  of  which  the  said  company  was  required 
to  furnish  gas  at  a  lower  price  than  it  had  been  charg- 
ing for  such  service.  In  deciding  the  question  of  the 
power  of  said  town  so  to  fix  the  price  at  which  the 
appellant  should  supply  the  citizens  with  gas,  the  court 
said:  "It  is  not  contended  that  the  general  statute 
upon  the  subject  of  incorporating  towns  confers  upon 
towns,  when  incorporated,  the  power  to  regulate  the 
price  at  which  natural  gas  shall  be  sold.  It  is  con- 
tended, however,  that  such  power  is  conferred  by  an 
act  of  the  general  assembly,  approved  March  7,  1887. 
That  act  is  as  follows:  'Section  i.  Be  it  enacted, 
etc..  That  the  boards  of  trustees  of  towns,  and  the 
common  councils  of  cities,  in  this  state,  shall  have 
power  to  provide  by  ordinance,  reasonable  regulations 
for  the  safe  supply,  distribution  and  consumption  of 
natural  gas  within  the  respective  limits  of  such  towns 
and  cities,  and  to  require  persons  or  companies  to 
whom  the  privileges  of  using  the  streets  and  alleys 
of  such  towns  and  cities  is  granted  for  the  supply  and 
distribution  of  such  gas  to  pay  a  reasonable  license, 
for  such  franchise  and  privilege.'  .  .  .  There  is 
not  a  word  or  a  syllable  to  be  found  in  this  act  indi- 
cating that  the  general  assembly  had  in  view  any  other 
purpose  than  that  of  securing  the  safe  supply  and  use 
of  natural  gas.  To  secure  the  safe  supply  and  use 
of   natural   gas   is   one   thing  and   to  fix  the   price   at 


497  RIGHT    TO    FIX    RATES.  §  436 

which  gas  shall  be  supplied  is  another  and  quite  dif- 
ferent thing.  In  our  opinion  it  was  not  the  intention 
of  the  general  assembly  to  confer,  by  the  act  above  set 
out,  the  power  to  regulate  the  price  at  which  natural 
gas  should  be  furnished.  .  .  .  The  trustees  of  the 
town  of  Lewisville  having  no  power  to  regulate  the 
price  at  which  natural  gas  should  be  furnished,  the 
ordinance  in  question,  purporting  to  do  so  is  void 
upon  its  face." 

The  decision  of  this  case  was  expressly  affirmed  by 
the  same  court  in  Noblesville  v.  Noblesville  Gas,  &c., 
Co.,  157  Ind.  162,  60  N.  E.  1032,  decided  in  1901, 
where  the  court  said:  "It  will  be  doing  violence  to 
the  rules  of  statutory  construction  to  hold  that  under 
the  law  of  1887  [quoted  supra]  the  power  of  a  city, 
when  not  reserved  in  granting  a  franchise,  to  prescribe 
the  prices  chargeable  by  its  licensee  to  consumers  of 
its  gas,  is  free  from  fair  and  reasonable  doubt." 

§  436.  Power  to  contract  and  to  regulate  distin- 
guished.— In  this  case  the  appellee  company  had  in- 
stituted an  action  to  enjoin  the  appellant  city  from 
enforcing  an  ordinance  regulating  the  rates  to  be 
charged  consumers  of  natural  gas.  It  appeared  that 
the  franchise  originally  granted  said  company  gave  no 
exclusive  right  and  fixed  no  time  for  its  continuance 
and  imposed  no  restrictions  upon  the  price  to  be 
charged  for  gas  either  by  express  stipulation  or  a 
reservation  to  fix  or  control  prices  thereafter.  The  or- 
dinance passed  by  the  city  later,  however,  fixed  the 
maximum  rates  in  particular  cases  that  might  be 
charged  by  any  one  accepting  its  provisions,  which 
the  appellee  company  did  expressly  in  writing  duly 
filed  with  the  common  council  of  said  city.  In  decid- 
ing the  case  on  this  point  in  favor  of  the  city  the  court 
said:     "That  the   city  had  no  power  to  regulate   the 

32— Pub.  Ut 


§  437  PUBLIC    UTILITIES.  498 

rates  of  its  licensee  makes  no  difference.  It  had  the 
power  to  contract.  And  the  power  to  regulate  as  a 
governmental  function,  and  the  power  to  contract  for 
the  same  end,  are  quite  different  things.  One  requires 
the  consent  only  of  one  body,  the  other  the  consent 
of  two.  In  this  instance  the  city  acted  in  the  exercise 
of  its  power  to  contract,  and  it  is  therefore  entitled 
to  the  benefits  of  its  bargain.  There  is  no  merit  in 
appellee's  contention  that  the  ordinance  of  1888  fails 
for  want  of  consideration.  Appellee's  original  fran- 
chise of  1886  was  without  restriction  as  to  rates;  and 
it  could  have  continued  to  enjoy  its  franchise  and  fix 
its  own  rates  (if  reasonable)  if  it  had  chosen  to  do  so. 
By  the  ordinance  of  1888  the  city  in  effect  proposed 
that  any  person,  firm  or  corporation,  including  appel- 
lee, desiring  the  use  of  its  streets  and  alleys  as  a  means 
of  marketing  natural  gas,  might  have  the  same,  by 
undertaking  to  abide  by  and  perform  all  the  conditions 
set  forth,  including  the  limitation  upon  prices  for  gas. 
Appellee  was  not  required  to  accept  the  new  proposi- 
tion. It  might  have  gone  on  without  a  contract  for 
chargeable  rates,  and  taken  its  chances  of  legal  inter- 
ference, or  it  might  free  itself  of  uncertainty  by  ac- 
cepting the  certainty  of  contract.  It  chose  the  latter 
course,  accepted  the  ordinance,  and  for  the  first  time 
had  a  contract  and  a  legal  authorization  to  charge  the 
price  specified  in  the  ordinance  contract.  This  was  a 
sufficient  consideration." 

§  437.  Rates  fixed  by  agreement  of  parties  bind- 
ing.— This  contractual  power  of  municipalities  to  im- 
pose regulations  in  the  matter  of  rates  to  be  charged 
for  gas  when  the  company  agrees  to  accept  the  same, 
and  by  so  doing  enters  into  a  contract  of  its  own 
motion,  is  further  defined  and  established  in  the  case 
of  Muncie  Natural  Gas  Co.  v.  Muncie,  160  Ind.  97,  66 


499  RIGHT    TO    FIX    RATES.  §  437 

N.  E.  436,  60  L.  R.  A.  822,  decided  in  1903.  This  was 
an  action  to  restrain  the  violation  of  a  contract  under 
which  the  appellant  company  was  given  authority 
by  the  respondent  city  to  maintain  and  operate  a 
natural  gas  system  in  said  city  and  to  supply  gas  at 
not  to  exceed  the  maximum  rates  stipulated  in  said 
contract.  To  the  defense  of  said  company  that  such 
contract  was  ultra  vires  the  city  and  therefore  void 
because  no  power  was  vested  in  it  to  enter  into  such 
a  contract  fixing  the  rates  to  be  charged  its  inhabitants 
for  gas,  the  court  held  that,  since  the  company  had 
continued  to  use  the  streets  of  said  city  for  the  dis- 
tribution of  natural  gas  to  private  consumers  by  vir- 
tue of  such  contract,  it  was  not  within  the  power  of 
the  company  to  deny  the  right  of  the  city  to  enter 
into  such  a  contract. 

But  in  the  course  of  its  opinion  the  court  expressed 
the  belief  that  there  was  no  lack  of  power  in  the  city 
to  make  such  a  contract,  saying:  "Natural  gas  is  a 
public  utility  that  can  not  be  obtained  by  the  citizens 
of  a  municipality  generally,  except  as  it  is  conducted 
in  pipes  along  the  public  ways  of  the  city.  The  grant 
of  exclusive  power  to  the  common  council  over  such 
ways  comprehends  the  right  to  permit  gas  companies 
to  use  the  streets.  If  the  common  council  may  per- 
mit a  natural  gas  company  to  use  the  streets  without 
any  condition  annexed,  except  such  as  the  law  at- 
taches, it  is  not  perceived  why,  as  in  this  case,  in 
making  provision  for  supplying  natural  gas  to  all  of 
the  inhabitants  of  the  city,  it  may  not  protect  such 
inhabitants  against  extortion  by  providing  that  the 
company  shall  not  charge  in  excess  of  certain  prices 
for  its  service.  ...  It  was  not  limited  alone  to 
the  granting  of  this  franchise,  but  it  had  the  right  to 
prescribe    and    impose    terms    and    conditions.      When 


§  437  PUBLIC    UTILITIES.  5OO 

these  terms  and  conditions  .  .  .  were  accepted 
.     .     .     it  became  a  binding  contract." 

To  what  extent  the  city  has  power  to  insist  on 
stipulations,  regulating  rates  or  fixing  the  maximum 
price  which  might  be  charged  by  a  company  for  its 
gas,  in  negotiating  a  contract  for  the  granting  of  a 
franchise  to  such  a  company  when  it  refuses  to  accept 
such  stipulations  and  be  bound  in  the  matter  of  rates, 
this  case  does  not  decide.  And  while  the  expressions 
in  the  opinion  above  set  out  would  indicate  that  the 
attitude  of  the  court  favors  the  holding  that  such 
power  belongs  to  the  municipality  even  when  no  ex- 
press authority  has  been  delegated  to  it  to  fix  rates, 
this  position  was  not  necessary  to  the  decision  of  the 
case  and  so  can  not  be  regarded  as  having  the  au- 
thority of  law.  While  there  is  good  reason  for  holding 
the  city  to  have  the  power  to  prohibit  the  charging  of 
excessive  rates  in  connection  with  the  granting  of  its 
franchise  just  as  the  courts  will  enjoin  the  company 
from  making  extortionate  charges  for  its  service,  it 
is  submitted  the  city  can  not  from  time  to  time  regu- 
late the  rates  to  be  charged  under  the  mere  general 
authority  to  regulate  the  use  of  its  streets.  To  permit 
them  to  do  so  would  have  the  effect  of  denying  the 
validity  of  the  well  established  principle  that  such 
power  belongs  to  the  city  only  when  the  grant  of  it 
is  found  to  have  been  made  by  the  legislature  ex- 
pressly or  by  necessary  implication.  The  court  limits 
the  application  of  its  remarks,  however,  by  saying  that 
"municipalities  can  not,  under  existing  legislation,  ex- 
ercise the  legislative  power  to  fix  rates  in  any  case." 

This  principle  is  further  discussed  and  its  applica- 
tion more  clearly  defined  in  the  case  of  Rushville 
V.  Rushville  Natural  Gas  Co.,  164  Ind.  162,  73  N.  E. 
Sy,  which  was  decided  in  1905.  The  appellee  in  this 
case  was  in  occupation  of  the  streets  and  public  places 


50I  RIGHT    TO    FIX    RATES.  §  43" 

of  the  city  of  Rushville  and  was  supplying  its  inhabi- 
tants with  natural  gas,  under  a  franchise  granted  for 
that  purpose  by  an  ordinance  of  said  city  passed  in 
July,  1889,  known  as  No.  26,  which  imposed  no  re- 
strictions or  limitations  upon  said  appellee  with  respect 
to  the  rate  to  be  charged  consumers  for  such  gas,  or  as 
to  the  method  by  which  the  price  should  be  ascertained 
and  fixed.  In  August,  1890,  the  appellant  city  duly 
passed  another  ordinance,  known  as  No.  30,  granting 
generally  to  any  corporation,  firm,  company  or  individ- 
ual a  franchise  to  supply  said  city  and  its  inhabitants 
with  natural  gas  upon  compliance  with  certain  terms 
and  conditions.  And  in  May,  1899,  said  city  passed  a 
third  ordinance  known  as  No.  y^,  amending  said 
ordinance  No.  30  by  providing  for  the  use  of  meters 
for  the  measurement  of  the  gas  consumed  and  limit- 
ing the  charge  therefor  to  fifteen  cents  per  thousand 
feet.  The  action  in  the  case  was  brought  by  the  ap- 
pellant to  enjoin  the  appellee  from  increasing  its  rates 
and  charging  consumers  of  natural  gas  in  excess  of 
the  maximum  price  fixed  by  the  provisions  of  said 
ordinances  Nos.  30  and  J^i-  The  court  stated  the 
principle  in  question  in  the  following  decisive  lan- 
guage : 

"Appellee  accepted  the  provisions  of  this  ordinance 
[No.  26],  adjudged  and  conceded  to  be  valid,  and  con- 
structed its  plant  at  a  cost  of  $100,000,  to  fulfill  the 
purpose  of  its  creation.  The  acceptance  by  appellee 
of  the  privileges  granted  by  appellant  in  this  ordinance 
constituted  a  contract  equally  binding  upon  both  par- 
ties, and  when  acted  upon  rights  became  vested,  and 
its  provisions  became  secure  against  impairment  by 
any  subsequent  municipal  action.  .  .  .  This  ordi- 
nance did  not  prescribe  any  limits  as  to  charges  for 
gas,  or  reserve  to  the  city  the  right  thereafter  so  to 
do.     No  alteration  of  or  addition  to  the  terms  of  the 


S  437  PUBLIC    UTILITIES.  502 

contract  thus  formed  could  be  made  afterwards  by 
either  party  without  the  consent  of  the  other.  .  .  . 
It  is  now  the  settled  law  of  this  state  that,  under  such 
circumstances  as  shown  here,  cities  have  no  authority 
or  power  by  subsequent  ordinance  or  action,  to  impose 
any  additional  restrictions  regulating  the  price  to  be 
charged  for  gas  furnished  under  such  contract." 

The  case  of  Richmond  v.  Richmond  Natural  Gas 
Co.,  168  Ind.  82,  79  N.  E.  1031,  decided  in  1907,  which 
was  an  injunction  to  prevent  the  defendant  company 
from  charging  a  greater  rate  than  that  provided  in 
an  ordinance  which  the  plaintiff  city  had  passed  after 
the  defendant  had  installed  its  plant  under  a  franchise 
which  did  not  attempt  to  fix  or  control  the  rate  to  be 
charged  and,  as  the  state  had  not  expressly  delegated 
to  the  municipality  the  power  to  fix  or  regulate  the 
rates,  the  court  in  refusing  to  sustain  the  injunction 
held  the  ordinance  attempting  to  fix  the  rate  invalid 
because  beyond  the  power  of  the  city  and  because  it 
was  an  unconstitutional  attempt  to  impair  the  prop- 
erty rights  of  the  defendant  company.  This  case  repre- 
sents a  practice  all  too  common  and  shows  the  folly 
of  the  municipal  corporation  in  failing  to  regulate  and 
fix  the  rate  in  connection  with  the  grant  of  its  con- 
sent to  the  municipal  public  utility  to  use  its  streets. 
In  the  course  of  its  opinion  the  court  said:  "Where  a 
franchise  to  supply  gas  is  granted  without  restriction 
as  to  prices,  accepted,  and  acted  upon,  cities  incor- 
porated under  the  general  law  of  this  state  had  no 
authority  prior  to  1905,  by  subsequent  ordinance  or 
action,  to  impose  additional  provisions  regulating 
prices  to  be  charged  for  gas  furnished  under  the  orig- 
inal franchise.  .  .  .  The  general  assembly  of  1905, 
in  revising  the  statutes  governing  cities  and  towns, 
conferred  upon  cities  the  following  among  other  pow- 
ers:     '(36)  To  license  and  regulate  the  supply,  distri- 


503  RIGHT    TO    FIX    RATES.  §  437 

bution  and  consumption  of  artificial  and  natural  gas, 
electricity,  heat  and  water,  and  to  fix  by  contract  or 
franchise  the  prices  thereof,  etc'  .  .  .  The  stat- 
ute relied  upon  purports  to  empower  a  city  of  the 
class  to  which  appellant  belongs  to  fix  prices  only  'by 
contract  or  franchise.'  When  the  manner  in  which  a 
delegated  power  is  to  be  exercised  is  prescribed,  it 
must  be  substantially  followed.  .  .  .  The  ordi- 
nance under  consideration  is  without  any  of  these  char- 
acteristics. It  neither  grants  a  new  right,  nor  con- 
firms or  extends  an  existing  one,  but  merely  seeks 
to  impose  special  restrictions  upon  an  existing  right  to 
the  use  of  the  streets  and  alleys  of  the  city.  .  .  . 
In  the  absence  of  charter  authority  or  other  statutory 
or  constitutional  provisions,  delegating  the  power  in 
express  terms  or  by  necessary  implication,  it  is  the 
rule  that  a  municipal  corporation  has  no  power  to 
fix  by  ordinance  the  price  at  which  a  gas  company 
shall  supply  its  customers.  20  Cyc.  1166,  and  cases 
there  cited.  In  this  case  it  appears  that  the  attempted 
regulation  of  prices  was  not  done  by  contract,  or  in 
connection  with  the  granting  or  acceptance  of  a  fran- 
chise, and  the  legislature  has  not  delegated  to  appel- 
lant, whatever  authority  to  regulate  prices  of  gas  it 
may  possess  in  the  premises,  to  be  exercised  in  any 
other  manner.  It  follows  that  the  ordinance  relied 
upon  is  invalid  as  against  appellee." 

The  case  of  Mills  v.  Chicago,  127  Fed.  731,  decided 
in  1904,  was  an  action  to  restrain  the  enforcement  of 
an  ordinance  of  the  defendant  city  forbidding  manu- 
facturers from  demanding  more  than  seventy-five 
cents  per  thousand  cubic  feet  for  gas  served  to  its  cus- 
tomers, which  was  a  marked  reduction  from  the  pre- 
vailing price  of  gas.  In  refusing  to  find  such  power 
in  the  city  to  regulate  the  rate  of  gas  supply  the  court 
said:     "No  one  has  pretended   that   the   regulation   of 


§  43^  PUBLIC    UTILITIES.  504 

the  price  of  gas  is  essential  to  the  specific  object 
for  which  the  city  of  Chicago  was  created.  .  .  . 
It  is  plain  to  me  that  the  sixty-sixth  section,  while 
granting  power  to  regulate  the  police  of  the  city  or 
village,  can  not  be  enlarged  to  include  power  to  regu- 
late the  price  of  gas.  .  .  .  The  mere  laying  of  gas 
pipe,  and  the  installation  of  gas  plants,  together  with 
their  repair,  are  the  subject-matter  of  a  power  widely 
separable  in  circumstance  from  the  power  to  deal  with 
the  rates  at  which  gas  shall  be  manufactured  and  sold. 
The  first  belongs  naturally  to  the  city  whose  streets 
are  to  be  occupied,  for  it  is  related  intimately  with 
the  supervision  of  streets;  the  latter,  with  equal  rea- 
son, is  foreign  naturally  to  the  city,  .  .  .  Until 
there  is  legislation,  more  unmistakable  than  the  lan- 
guage used  in  this  section,  to  indicate  a  purpose  to 
grant  the  city  power  to  fix  rates,  I  shall  not  hold  that 
such  was  the  legislative  intent.  Unquestionably  the 
power  resides  somewhere  in  the  state,  but  until  con- 
sciously delegated  to  some  other  body,  it  remains  in 
the  state's  general  repository  of  power,  the  general 
assembly  of  the  state." 

§  438.  Limitation  of  police  power. — And  finally 
the  case  of  State  ex  rel.  St.  Louis  v.  Laclede  Gas 
Light  Co.,  102  Mo.  472,  14  S.  W.  974,  22  Am.  St.  789, 
decided  in  1890,  was  a  mandamus  action  to  compel  the 
respondent  company  to  comply  with  an  ordinance  of 
the  relator  city  and  supply  gas  to  consumers  at  not  to 
exceed  ninety-five  cents  per  thousand  cubic  feet,  being 
a  reduction  from  one  dollar  and  twenty-five  cents  per 
thousand.  In  denying  such  power  in  the  city  by  virtue 
of  the  police  power  vested  therein,  the  court  expressed 
its  opinion  in  the  following  clear  language:  "It  is  not 
open  to  doubt  or  dispute  that  this  power  to  make 
and  vend  gas  carries  with  it  as  an  inevitable  incident 


505  RIGHT    TO    FIX    RATES.  §  438 

the  right  to  fix  the  price  of  the  gas  thus  made  and 
sold.  ...  So  that,  by  the  terms  of  the  charter 
of  the  respondent  company  its  right  to  fix  the  price 
of  its  product  was  as  much  a  part  of  its  charter  as 
if  it  had  been  in  terms  set  forth  in  section  5  of  the 
original  act  of  incorporation.  But,  if  a  price  had  thus 
been  set  forth,  no  one  familiar  with  constitutional 
principles  but  would  at  once  deny  that  the  right  to 
contract  for  the  sale  of  gas  at  such  price  could  any- 
wise be  impaired.  .  .  .  But  certainly  there  is  a 
limit  in  this  regard  over  which  legislatures  and  mu- 
nicipalities can  not  pass;  they  can  not,  in  the  exercise 
of  assumed  police  powers,  violate  charter  contracts 
and  overthrow  vested  rights.  On  this  subject  Judge 
Cooley  aptly  says:  'The  limit  to  the  exercise  of  the 
police  power  in  these  cases  must  be  this:  The  regula- 
tions must  have  reference  to  the  comfort,  safety  or 
welfare  of  society;  they  must  not  be  in  conflict  with 
any  of  the  provisions  of  the  charter;  and  they  must 
not.  under  pretense  of  regulation,  take  from  the  cor- 
poration any  of  the  essential  rights  and  privileges 
which  the  charter  confers.  In  short,  they  must  be 
police  regulations  in  fact,  and  not  amendment  of  the 
charter   in    curtailment    of   the    corporate    franchise.'  '" 

8  Cooley,    Constitutional    Limitations,    5th    ed.    712.      See    also 
Tacoma  Gas  and  Electric  Co.  v.  Tacoma,  14  Wash.  288,  44  Pa.  655. 


CHAPTER  XXII. 

RATES  MUST  BE  REASONABLE. 

Section. 

439.  Reasonable  rates  the  ultimate  object. 

440.  Fixing  rates  legislative  and  administrative. 

441.  Rates  should  vary  with  changed  conditions. 

442.  Reasonableness  of  rate  a  judicial  question. 

443.  No  return  on  investment  guaranteed. 

444.  Value  of  service  a  test  of  reasonableness. 

445.  Rates  for  future  fixed  by  contract  or  legislature  not  by  courts. 

446.  Rate  presumed  reasonable. 

447.  Reasonableness  of  rate  question  of  fact. 

448.  Limitation  of  reasonableness. 

449.  Question  of  reasonableness  raised  by  either  party. 

450.  Discretion  of  parties  fixing  rates  respected  unless  abused. 

451.  Municipal  public  utility  fixing  rates  must  be  reasonable. 

452.  Cost  of  service  includes  measuring  it  for  customer. 

453.  Reasonable  value  of  service  determines  the  rate. 

454.  Risk  of  investment  assumed  by  owner. 

§  439.  Reasonable  rates  the  ultimate  object. — ^The 
rates  which  municipal  public  utilities  receive  for  their 
service  must  be  reasonable,  w^hether  fixed  by  the  state 
itself  or  by  some  agency  duly  authorized  by  the  state 
such  as  municipalities  or  public  utility  commissions, 
or  where  the  rates  have  not  been  fixed  by  either  of 
these  authorities  the  municipal  public  utility  has  fixed 
the  rate  itself.  The  fixing  of  the  proper  rate  and 
securing  adequate  service  constitutes  at  once  the  crux 
and  the  conclusion  of  this  whole  matter  concerning 
municipal  public  utilities  and  their  service.  The  rate 
is  the  most  fundamental  question  of  the  entire  sub- 
ject because  it  controls  the  means  by  which  the  mu- 
nicipal public  utility  is  established  and  maintained  and 
506 


507  REASONABLE    RATES.  §  44O 

naturally  and  necessarily,  where  the  means  are  in- 
adequate or  insufficient,  the  service  is  impaired  or 
destroyed. 

On  the  other  hand  where  the  rate  received  by  the 
municipal  public  utility  for  its  service  is  exorbitant 
and  in  excess  of  its  value,  the  customer  receiving  the 
service  is  imposed  upon  by  being  forced  to  pay  in 
excess  of  the  value  he  receives.  The  control  of  these 
opposing  forces  and  conflicting  interests  and  the  right 
to  fix  the  rates  in  such  cases,  as  has  been  seen,  is  in 
the  state. 

§  440.     Fixing  rates  legislative  and  administrative. 

— The  fixing  of  such  rates  by  the  state  or  its  duly 
authorized  agency,  the  municipality  or  the  commis- 
sion, is  a  legislative  or  administrative  matter  and  not 
a  judicial  one,  the  proper  determination  of  which  by 
the  authorities  necessarily  involves  the  exercise  of 
their  best  judgment  and  discretion.  As  this  matter 
determines  the  means  and  directly  affects  the  motive 
for  furnishing  such  service,  it  is  the  point  of  greatest 
contest  and  the  occasion  for  most  of  the  controversies 
in  the  matter  of  municipal  public  utilities. 

§441.  Rates  should  vary  with  changed  conditions. 
— As  each  municipal  public  utility  system  individually 
has  conditions  peculiar  to  itself,  the  determination  of 
the  proper  rate  for  such  service  is  necessarily  confined 
to  the  facts  of  the  particular  case  in  question  and 
while  a  number  of  general  principles  governing  the 
matter  are  well  established,  their  proper  application 
in  any  particular  case  is  modified  and  controlled  by  the 
particular  facts  of  the  case  in  question.  There  are  so 
many  changing  circumstances  currently  affecting  the 
cost  of  supply,  the  nature  and  extent  of  the  service, 
the    prospects    for   its   being   permanent    or   becoming 


§  442  PUBLIC    UTILITIES.  508 

more  profitable  by  the  demand  increasing  while  the 
cost  is  decreased  by  inventions  and  more  improved 
methods  of  supply  and  distribution  that  the  matter 
of  fixing  the  rates  fairly  is  as  difficult  of  accomplish- 
ment as  it  is  necessary  that  the  entire  matter  be 
placed  in  the  hands  of  competent  authorities  with 
power  to  regulate  and  change  with  the  varying  con- 
ditions. The  regulation  of  rates  being  legislative  and 
governmental  in  its  nature  and  for  the  benefit  of 
the  consumers  of  the  service  is  necessarily  continu- 
ing for  the  right  to  modify  or  change  the  rate  should 
always  be  available  to  the  authorities  in  charge  of 
the  matter  in  the  interest  of  the  public  as  well  as  for 
the  sake  of  doing  justice  between  the  parties. 

§  442.     Reasonableness  of  rate  a  judicial  question. 

— Although  the  fixing  of  rates  is  a  legislative  and 
governmental  matter  over  which  the  state  has  com- 
plete control,  it  has  no  power  to  fix  rates  that  are  un- 
reasonable or  to  regulate  them  arbitrarily.  The  deter- 
mination that  any  particular  rate,  whether  fixed  by  the 
authority  of  the  state  or  by  the  municipal  public  utility 
itself,  is  fair  and  reasonable  is  a  judicial  question  over 
which  the  courts  have  complete  control.  And  while 
the  schedule  of  rates  fixed  by  the  state  or  an  agency 
to  whom  this  power  has  been  delegated  is  presumed 
to  be  fair  and  reasonable  so  that  the  burden  of  prov- 
ing that  it  is  arbitrary  and  unreasonable  is  on  the  mu- 
nicipal public  utility  making  the  claim,  the  state  has 
not  the  power  under  the  guise  of  regulation  to  destroy 
or  confiscate  the  property  of  the  corporation  providing 
the  service;  and  where  the  rate  fixed  has  the  effect  of 
depriving  the  company  of  the  right  to  realize  a  rea- 
sonable return  on  its  investment,  the  courts  will  not 
hesitate  to  set  aside  such  a  schedule  of  rates  as  un- 
reasonable  and  in  effect  a  taking  of  the  right  to  the 


il 


509  REASONABLE    RATES.  §  443 

use   of   its   property   as  well   as   of   the   property   itself 
without  due  process  of  law. 

The  term  "regulation"  implies  a  fair  investigation 
and  a  full  consideration  of  all  the  facts  affecting  the 
matter  upon  which  such  a  rate  of  return  should  be  al- 
lowed as  will  permit  of  the  continued  existence  of  the 
municipal  public  utility  and  the  furnishing  of  adequate 
service  as  well  as  a  reasonable  return  on  the  necessary 
investment.  The  court,  however,  is  restricted  to  the 
question  of  determining  whether  any  particular  rate 
already  fixed  is  reasonable  or  otherwise  and  can  not 
itself  fix  such  a  rate  because  this  power  inheres  en- 
tirely in  the  legislative  department  of  the  state. 

§  443.  No  return  on  investment  guaranteed. — No 
particular  return,  however,  is  guaranteed  to  the  mu- 
nicipal public  utility  on  its  investment  which  it  made 
voluntarily  and  of  its  own  accord,  it  thereby  neces- 
sarily assuming  the  risk  of  the  investment  being  a 
profitable  and  successful  one.  For  such  an  undertak- 
ing has  no  absolute  right  to  be  assured  of  the  security 
and  success  of  its  investment  any  more  than  that  of  a 
purely  private  enterprise,  although  as  in  such  a  business 
a  failure  to  realize  a  fair  return  on  the  investment  would 
finally  result  in  its  dissolution  and  the  discontinuance 
of  the  service  rendered.  It  is  a  general  rule  that  the 
return  is  limited  to  the  necessary  investment  and  does 
not  cover  property  acquired  by  the  company  which  is 
not  reasonably  necessary  to  the  service  presently  or 
prospectively;  and  mistakes  in  the  business  judgment 
of  the  management  in  charge  of  the  enterprise  must 
be  met  by  the  parties  making  the  investment  and  not 
by  the  consumers  of  its  service. 

§  444.  Value  of  service  a  test  of  reasonableness. 
— While   the  interests   of   the   owners   of  the   property 


§444  PUBLIC    UTILITIES.  5IO 

are  to  be  considered  they  are  not  entitled  to  a  greater 
return  than  it  can  normally  earn  under  proper  manage- 
ment. In  other  words  as  between  the  two  parties,  the 
public  or  the  consumer  has  the  right  to  receive  the 
service  at  its  fair  value  or  for  what  it  is  worth.  The 
customer  has  the  right  to  demand  that  no  more  shall 
be  exacted  from  him  for  such  service  than  the  reason- 
able value  of  the  service,  and  should  not  be  subjected 
to  the  payment  of  unreasonable  rates  simply  that 
stockholders  may  earn  dividends.  If  such  a  corpora- 
tion can  not  maintain  and  operate  its  plants  so  as  to 
pay  satisfactory  dividends  on  all  its  outstanding  stock, 
this  is  a  failure  which  the  constitution  does  not  re- 
quire to  be  remedied  by  imposing  unjust  burdens 
upon  the  public.^ 

The  following  cases  are  referred  to  by  way  of 
illustrating  the  rule  and  its  application  that  fixing 
rates  is  a  legislative  matter  and  the  determination 
as  to  whether  the  rates  when  fixed  are  reasonable  is 
judicial;  and  also  that  no  particular  return  is  guaran- 
teed such  a  corporation  on  its  investment  but  that  the 
value  of  the  service  is  a  test  of  the  rate  to  be  charged 
for  it." 

1  Covington  and  Lexington  Turnpike  Co.  v.  Sandford,  164  U.  S. 
578,  41  L.  ed.  560. 

2  ALABAMA.— Montgomery  Light  &  Power  Co.  v.  Watts,  165 
Ala.  370,  51  So.  725,  26  L.  R.  A.  (N.  S.)  1109. 

CALIFORNIA.— San  Diego  Water  Co.  v.  San  Diego,  118  Cal. 
556,  50  Pac.  633,  38  L.  R.  A.  460,  62  Am.  St.  261. 

FEDERAL.— Capital  City  Gasligtit  Co.  v.  Des  Moines,  72  Fed. 
829;  Kankakee  v.  American  Water  Supply  Co.,  199  Fed.  757;  New 
Memphis  Gas  &  Light  Co.  v.  City  of  Memphis,  72  Fed.  952;  Palatka 
Waterworks  v.  Palatka,  127  Fed.  161;  Pocatello  v.  Murray,  173  Fed. 
382;  Spring  Valley  Water  Co.  v.  San  Francisco,  165  Fed.  667;  Spring 
Valley  Waterworks  v.  San  Francisco,  124  Fed.  574;  Spring  Valley 
Waterworks  v.  San  Francisco,  192  Fed.  137. 

FLORIDA.— Wilson  v.  Tallahassee  Waterworks  Co.,  47  Fla.  351, 
36  So.  63. 


511  REASONABLE    RATES.  §445 

§  445.  Rates  for  future  fixed  by  contract  or  legis- 
lature not  by  courts. — The  application  of  this  principle 
to  the  question  of  providing  service  by  municipal  pub- 
lic utilities  is  made  in  the  case  of  Pocatello  v.  Murray, 

173  Fed.  382,  decided  in  1909,  where  the  court  says: 
"But  I  am  further  of  the  opinion  that  even  if  it  should 
be  conceded  that  the  statute  of  Idaho  above  referred 
to  is  applicable  to  the  contract  under  v^hich  the  defend- 
ant is  supplying  water  to  the  city  of  Pocatello,  and  so 
prescribes  the  method  by  which  that  city  may  change 
the  schedule  of  water  rates  named  in   the  ordinance, 

IDAHO.— Bothwell  v.  Consumers'  Co.,  13  Idaho  568,  92  Pac.  533, 
24  L.  R.  A.   (N.  S.)  485. 

IOWA.— Des  Moines  v.  Des  Moines  Waterworks  Co.,  95  Iowa  348, 
64  N.  W.  269. 

MAINE.— Brunswick  &  T.  Water  Dist.  v.  Maine  Water  Co.,  99 
Maine  371,  59  Atl.  537;  Kennebec  Water  Dist.  v.  Waterville,  97 
Maine  185,  54  Atl.  6,  60  L.  R.  A.  856. 

MISSOURI.— Home  Tel.  Co.  v.  Carthage,  235  Mo.  644,  139  S.  W. 
547. 

NEBRASKA.— Nebraska  Tel.  Co.  v.  State,  55  Nebr.  627,  76  N.  W. 
171,  45  L.  R.  A.  113. 

NEW  YORK.— Brooklyn  Union  Gas  Co.  v.  New  York,  188  N.  Y. 
334,  100  N.  Y.  S.  570,  81  N.  E.  141,  15  L.  R.  A.  (N.  S.)  763;  People  ex 
rel.  Central  Park,  &c.,  R.  Co.  v.  Wilcox,  194  N.  Y.  383,  87  N.  E.  517. 

NORTH  CAROLINA.— Griffin  v.  Goldsboro  Water  Co.,  122  N. 
Car.  206,  30  S.  E.  319,  41  L.  R.  A.  240;  Horner  v.  Oxford  Water  & 
Electric  Co.,  153  N.  Car.  535,  69  S.  E.  607. 

OHIO.— State  ex  rel.  Atty.  Gen.  v.  Cincinnati,  &c.,  Co.,  IS  Ohio 
St.  262. 

PENNSYLVANIA.— Brymer  v.  Butler  Water  Co.,  179  Pa.  231, 
36  Atl.  249.  36  L.  R.  A.  260. 

UNITED  STATES.— Chicago,  &c.,  R.  Co.  v.  Wellman,  143  U.  S. 
339,  36  L.  ed.  176;  Louisville  v.  Cumberland  Tel.  &  T.  Co.,  225  U.  S. 
430,  56  L.  ed.  1151;  People's  Gaslight  &  Coke  Co.  v.  Chicago,  194  U. 
S.  1,  48  L.  ed.  851;  Reagan  v.  Farmers  Loan  &  Trust  Co.,  154  U.  S. 
362,  38  L.  ed.  1014;  San  Diego  Land  &  Town  Co.  v.  National  City, 

174  U.  S.  739,  43  L.  ed.  1154. 

WASHINGTON.— Twitchell  v.  Spokane,  55  Wash.  86,  104  Pac. 
150,  24  L.  R.  A.  (N.  S.)  290. 

WISCONSIN.— Madison  v.  Madison  Gas  &  Electric  Co.,  129  Wia. 
249,  108  N.  W.  65,  8  L.  R.  A.  (N.  S.)  529,  116  Am.  St.  944. 


§446  PUBLIC    UTILITIES.  512 

this  court  would  still  be  without  jurisdiction  to  fix 
and  promulgate  the  water  rates  and  charges,  which  the 
defendant  shall  have  the  right  to  collect,  during  the 
next  three  years,  under  his  franchise.  The  fixing  of 
such  rates,  when  not  a  matter  of  contract,  'is  a  legis- 
lative or  administrative,  rather  than  a  judicial  func- 
tion.' Reagan  v.  Farmers'  Loan  &  Trust  Co.,  154  U. 
S-  397,  38  L.  ed.  1014." 

§  446.  Rate  presumed  reasonable. — That  reason- 
ableness is  a  judicial  limitation  which  is  placed  upon 
the  right  of  the  legislature  to  fix  rates  is  well  ex- 
pressed in  the  case  of  Palatka  Waterworks  v.  Palatka, 
127  Fed.  161,  decided  in  1903,  although  the  court  also 
observes  that  any  rate  so  fixed  should  not  be  set  aside 
by  the  court  as  unreasonable  unless  it  is  such  without 
question,  in  which  case,  however,  the  courts  will  act 
for  the  purpose  of  protecting  the  property  rights  of 
the  municipal  public  utility,  for  as  the  court  in  this 
case  says :  "Conceding  the  legislative  right  to  regu- 
late the  charges  to  be  made  by  the  complainant  for 
water,  such  regulation  must  be  within  reasonable  lim- 
its. It  could  not  lawfully  go  to  the  extent  of  depriving 
the  complainant  of  all  income  from  its  investment,  and 
in  effect  confiscate  its  property.  The  power  to  regu- 
late could  not  legally  be  used  as  the  power  to  destroy. 
The  question  of  the  reasonableness  of  such  regulations 
is  one  for  judicial  examination  and  determination. 
Covington  Road  Co.  v.  Sandford,  164  U.  S.  578,  41 
L.  ed.  560.  But  the  judiciary  ought  not  to  interfere 
with  rates  established  under  legislative  sanction,  where 
the  legislature  has  the  right  to  act,  unless  they  are 
plainly  and  palpably  so  unreasonable  as  to  make  their 
enforcement  equivalent  to  depriving  the  complainant 
of  reasonable  returns  on  its  investment;  but  judicial 
interference  is  proper  when  the  case  shows  an  attack 


5^3 


REASONABLE    RATES.  §  447 


Upon  the  rights  of  property,  under  the  guise  of  regu- 
lating, which  will  make  the  plaintiff's  property  value- 
less in  his  hands,  by  annulling  or  making  inoperative 
existing  contracts.  San  Diego  Land  Co.  v.  National 
City,  174  U.  S.  739,  43  L.  ed.  1154;  Covington  Road 
Co.  V.  Sandford,  supra." 

The  leading  case  of  San  Diego  Land  &  Town  Co. 
V.  National  City,  174  U.  S.  739,  43  L.  ed.  1154,  decided 
in  1899,  in  defining  what  constitutes  reasonable  rates 
also  observes  on  the  point  in  question,  "that  the 
judiciary  ought  not  to  interfere  with  the  collection 
of  rates  established  under  legislative  sanction,  unless 
they  are  so  plainly  and  palpably  unreasonable  as  to 
make  their  enforcement  equivalent  to  the  taking  of 
property  for  public  use  without  such  compensation, 
as,  under  all  the  circumstances,  is  just,  both  to  the 
owners  and  to  the  public." 

§  447.     Reasonableness  of  rate  question  of  fact. — 

Where  there  is  a  question  of  fact  as  to  whether  the 
rate  in  the  particular  case  is  a  proper  one  the  court 
will  indulge  the  presumption  in  favor  of  the  rate  so 
fixed  and  refuse  to  interfere  with  it,  for  as  the  Supreme 
Court  of  the  United  States,  in  the  recent  case  of 
Louisville  v.  Cumberland  Tel.  &  T.  Co.,  225  U.  S. 
430,  56  L.  ed.  1 151,  decided  June  7,  1912,  observes: 
"But  when  it  is  remembered  what  clear  evidence  the 
court  requires  before  it  declares  legislation  otherwise 
valid  void  on  this  ground,  and  when  it  is  considered 
how  speculative  every  figure  is  that  we  have  set  down 
with  delusive  exactness,  we  are  of  opinion  that  the 
result  is  too  near  the  dividing  line  not  to  make  actual 
experiment  necessary." 

"The  extent  of  judicial  interference  is  protection 
against  unreasonable  rates."  Chicago,  &:c..  R.  Co.  v. 
\\'ellman,   143  U.  S.  339.  36  L.  ed.   '76. 

33 -Pub.  ut» 


§447  PUBLIC    UTILITIES.  514 

The  case  of  New  Memphis  Gas  &  Light  Co.  v. 
Memphis,  ^2  Fed.  952,  decided  in  1896,  furnishes  an 
accurate  statement  in  forceful  language  which  stands 
unchallenged  to  the  effect  that:  "The  question  of  the 
reasonableness  of  a  rate  of  charge  is  eminently  a  ques- 
tion for  judicial  investigation,  requiring  due  process 
of  law  for  its  determination.  And  to  deprive  a  com- 
pany of  the  power  of  charging  reasonable  rates  for 
the  manufacture  and  sale  of  gas  is  to  deprive  it  of  the 
use  of  its  property,  and,  in  effect,  of  the  property 
itself,  without  the  due  process  of  law.  .  .  .  And 
the  very  use  of  the  term  'regulation'  implies  that  an 
investigation  shall  be  made;  that  an  opportunity  to 
present  the  facts  shall  be  furnished;  that,  when  the 
facts  are  established,  they  shall,  by  the  regulating 
power,  be  given  due  consideration;  and  that  such 
action  as  shall  be  taken  in  view  of  these  facts,  thus 
ascertained,  shall  be  just  and  reasonable,  and  such  as 
enables  the  company  to  maintain  its  existence,  to  pre- 
serve the  property  invested  from  destruction,  and  to 
receive,  on  the  capital  actually  and  bona  fide  invested 
in  the  plant,  a  remuneration  or  dividend  corresponding 
in  amount  to  the  ruling  rates  of  interest." 

The  duty  devolving  upon  the  court  of  deciding 
between  the  contending  parties  only  as  to  whether  a 
particular  rate  already  fixed  is  fair  and  equitable  is 
well  expressed  in  the  case  of  Spring  Valley  Water- 
works Co.  V.  San  Francisco,  165  Fed.  667,  decided  in 
1908,  as  follows:  "If  the  supervisors  have  the  power, 
and  it  is  their  duty  to  prescribe  just  and  reasonable 
rates,  and  the  court  has  the  power  to  decide  whether 
such  rates  are  reasonable,  and  to  annul  ordinances  in 
which  the  rates  prescribed  are  unjust  and  unreason- 
able, it  must  follow  that  'the  court  has  no  power,'  as 
Judge  Morrow  says  in  Spring  Valley  Waterworks  v. 
San  Francisco,  infra,  'to  diminish  the  measure  of  what 


515  REASONABLE    RATES.  §  448 

is  just  compensation  in  any  degree.'  The  court  must 
ascertain  the  fact;  ascertain  whether  the  ordinance 
crosses  the  line  which  separates  that  which  is  just  and 
reasonable  from  that  which  is  unjust  and  unreasonable, 
and  so  declare." 

§  448.  Limitation  of  reasonableness. — That  the 
court  can  not  fix  the  rate  itself,  however,  but  is  lim- 
ited in  its  jurisdiction  in  determining  whether  a  rate 
when  fixed  is  reasonable  and  proper  is  the  generally 
accepted  rule  as  expressed  in  the  case  of  Nebraska  Tel. 
Co.  V.  State,  55  Nebr.  627,  76  N.  W.  171,  45  L.  R.  A. 
113,  decided  in  1898,  as  follows:  "Here  the  court  de- 
termines that  the  respondent  shall  perform  for  the 
relator  a  specific  service  for  three  months  for  a  specific 
sum  of  money.  This,  in  effect,  was  a  determination 
by  the  court  that  three  dollars  per  month  was  a  rea- 
sonable compensation  for  the  service  required  to  be 
rendered  by  the  respondent,  and  a  fixing  of  the  com- 
pensation for  such  service  at  that  price  for  the  future. 
We  think  the  history  of  the  legislation  of  the  entire 
country  shows  that  the  power  to  determine  what  com- 
pensation public  service  corporations  may  demand  for 
their  services  is  a  legislative  function,  and  not  a  judi- 
cial one." 

§  449.  Question  of  reasonableness  raised  by  either 
party. — The  presumption  in  favor  of  the  rate,  when 
fixed  by  the  state  or  its  duly  authorized  agency,  the 
municipality,  being  a  reasonable  one  is  not  only  bind- 
ing on  the  company  furnishing  the  service  but  also 
on  the  customer  who  is  accordingly  liable  to  pay  for 
the  service  furnished  him  at  a  rate  not  in  excess  of  the 
one  so  fixed.  No  matter  how  unreasonably  high  such 
rates  may  be  the  case  of  Brooklyn  Union  Gas  Co.  v. 
New  York,   188  N.  Y.  334.  81   N.  E.   141,   100  N.  Y. 


§449  PUBLIC    UTILITIES.  516 

S.  570,  15  L.  R.  A.  (N.  S.)  763,  decided  in  1907,  holds 
that  no  constitutional  right  of  the  customer  is  thereby- 
invaded  because  he  is  under  no  obligation  to  purchase 
the  service  and  that  he  must  seek  his  relief  in  case 
the  rate  is  excessive  at  the  hands  of  the  legislature  and 
not  through  the  courts,  for  as  the  court  says:  "What- 
ever price  the  legislature  permitted  the  plaintiff  to 
charge  must  be  deemed  to  be  reasonable  and  hence 
a  charge  of  any  sum  below  the  maximum  of  $1.25 
must  be  deemed  and  taken  to  be  a  reasonable  charge. 
When  the  price  of  a  commodity  is  established  by  lav^, 
it  is  not  competent  for  the  party  purchasing  it  to  re- 
sist payment  on  the  ground  that  the  law  has  permitted 
the  seller  to  make  an  unreasonable  charge.  Hence, 
when  the  plaintiff  furnished  and  the  defendant  received 
and  used  the  gas,  the  latter  was  precluded  by  statute 
from  raising  any  controversy  such  as  this  with  respect 
to  the  reasonableness  of  the  charge.  In  other  words, 
the  charge  must,  in  view  of  the  statute  be  deemed 
reasonable." 

The  case  of  Griffin  v.  Goldsboro  Water  Co.,  122  N. 
Car.  206,  30  S.  E.  319,  41  L.  R.  A.  240,  decided  in 
1898,  however,  disagrees  with  this  principle  with  some 
degree  of  reason,  for  if  the  municipal  public  utility 
has  the  right  to  attack  a  rate  on  the  theory  that  it  is 
inadequate  it  is  argued  relief  should  be  equally  avail- 
able to  the  customer  against  excessive  rates,  and  in 
the  absence  of  a  contract  by  competent  parties  fixing 
rates  there  is  no  reason  why  an  excessive  as  well  as 
an  inadequate  rate  should  not  be  set  aside.  The  rea- 
son given  for  the  decision  in  this  case  is  not  entirely 
satisfying,  however,  because  it  holds  that  the  munici- 
pal public  utility  is  bound  by  the  rate  as  fixed  and  at 
the  same  time  permits  the  customer  to  have  it  set  aside 
as  excessive.  In  the  course  of  its  opinion  the  court 
says:     "While  the  defendant  can  not  charge  more  than 


51/  REASONABLE    RATES.  §450 

the  rates  stipulated  in  the  ordinance  granting  it  the 
franchise,  because  granted  upon  that  condition,  those 
rates  are  not  binding  upon  consumers  who  have  a 
right  to  the  protection  of  the  courts  against  unreason- 
able charges.  .  .  .  Singularly  enough,  it  appears 
incidentally  in  the  evidence  furnished  by  the  defendant 
that,  in  the  towns  in  North  Carolina  which  do  not  own 
their  waterworks,  the  maximum  rates  charged  con- 
sumers are  from  fifty  to  three  hundred  per  cent,  more 
than  the  maximum  rates  charged  consumers  in  Wilson, 
Winston,  and  Asheville,  the  only  towns  which  own 
their  water-works." 

The  difference  between  these  two  cases  seems  to 
be  one  of  form  or  procedure,  however,  rather  than  of 
law,  for  both  recognize  the  right  of  the  customer  to 
raise  the  question,  although  the  former  one  insists 
that  his  relief  must  come  through  the  legislature 
which  alone  has  the  power  to  fix  the  rate  and  not 
through  the  courts  which  can  only  determine  their 
reasonableness. 

§  450.  Discretion  of  parties  fixing  rates  respected 
unless  abused. — The  fixing  of  rates  by  the  state  or  its 
duly  authorized  agent  necessarily  involves  the  exer- 
cise of  discretion  on  the  part  of  the  authorities,  and 
unless  there  is  an  abuse  of  this  discretion  so  that  the 
rate  fixed  is  clearly  unreasonable,  the  courts  will 
refuse  to  set  it  aside  as  such,  for  as  the  court  in  the 
case  of  Twitchell  v.  Spokane,  55  Wash.  86,  104  Pac. 
150,  24  L.  R.  A.  (N.  S.)  290,  decided  in  1909,  says: 
"Some  reasonable  discretion  must  abide  in  the  officers 
whose  duty  it  is  to  fix  such  rates,  and,  unless  the  courts 
can  say  from  all  the  circumstances  that  the  rate  fixed 
is  an  excessive  one  and  disproportionate  to  the  service 
rendered,  the  judgment  of  the  officers  fixing  the  rate 


§451  PUBLIC    UTILITIES.  518 

must    stand.      The    rate    charged    by    the    city    seems 
reasonable  for  the  service  rendered." 

§451.  Municipal  public  utility  fixing  rates  must 
be  reasonable. — Where  the  rates  have  not  been  fixed 
by  the  state  or  any  authority  acting  for  it,  the  mu- 
nicipal public  utility  having  the  right  to  furnish  the 
service  by  virtue  of  that  fact  has  the  right  to  fix  the 
charge  for  its  service,  although  of  course  the  reason- 
ableness of  the  charge  when  fixed  is  a  question  for  the 
courts  to  determine,  and  where  they  are  excessive  they 
will  be  set  aside  by  the  courts  the  same  as  where  the 
state  authority  fails  to  fix  the  proper  rate.  As  the 
court  in  the  case  of  Wilson  v.  Tallahassee  Water- 
works Co.,  47  Fla.  351,  36  So.  63,  decided  in  1904, 
says:  "Not  being  included  within  those  cases  for 
which  rates  are  prescribed,  the  company  may  fix  rates 
(Carney  v.  ChilHcothe  Water  &  Light  Company,  76 
Mo.  App.  532),  and  the  fixing  of  a  minimum  charge 
for  service  to  small  consumers  in  excess  of  the  ordi- 
nary price  of  the  quantity  of  water  consumed  by  them 
is  not  in  itself  unreasonable.  State  ex  rel.  Weise  v. 
Sedalia  Gaslight  Company,  34  Mo.  App.  501.  See, 
also,  Louisville  Gas  Co.  v.  Dulaney  (Ky.),  38  S.  W. 
703,  36  L.  R.  A.  125." 

§  452.  Cost  of  service  includes  measuring  it  for 
customer. — The  duty  devolves  upon  the  municipal 
public  utility  of  measuring  the  service  furnished  the 
customer  in  order  to  determine  the  amount  due  from 
him,  and  where  the  rate  to  be  paid  for  the  service 
is  fixed  and  defined,  the  expense  of  measuring  the 
service  furnished  can  not  be  charged  to  the  customer 
in  the  form  of  meter  rentals  or  as  a  fixed  minimum 
charge  per  month,  for  as  the  court  in  the  case  of 
Montgomery  Light  &  P.  Co.  v.  Watts,   165  Ala.  370, 


519  REASONABLE    RATES.  §  452 

51  So.  725,  26  L.  R.  A.  (N.  S.)  1 109,  decided  in  1910, 
says:  "The  agreement  of  the  company  is  to  furnish 
gas  at  so  much  per  cubic  foot,  and  that  must  neces- 
sarily mean  that  all  the  means  and  instrumentalities 
necessary  to  furnish  it  at  those  rates  shall  be  provided 
by  the  company.  It  may  adopt  any  means,  suitable 
and  accurate,  for  ascertaining  the  number  of  feet 
consumed,  and  the  customer  can  not  direct  or  provide 
what  means  shall  be  used;  his  only  concern  being  that 
he  receives  the  service,  and  is  not  charged  more  than 
the  rate  fixed  by  law  or  the  contract." 

As  the  duty  of  fixing  the  rate  as  well  as  determin- 
ing the  amount  of  the  service  at  its  own  expense,  where 
the  rate  has  not  been  fixed  by  the  state,  devolves  upon 
the  municipal  public  utility,  the  court  will  compel  the 
furnishing  of  such  service  at  the  rate  fixed,  for  as  the 
court  in  the  case  of  Bothwell  v.  Consumers'  Co.,  13 
Idaho  568,  92  Pac.  533,  24  L.  R.  A.  (N.  S.)  485,  de- 
cided in  1907,  says:  "We  have  failed,  however,  to  find 
a  single  case  where  a  company  had  fixed  its  own  rates, 
and  the  individual  had  offered  to  pay  such  rates,  that 
a  court  has  refused  to  allow  him  to  pay  that  rate  or 
refused  to  compel  the  company  to  supply  him  with 
water  upon  the  tender  of  such  rate.  .  .  .  The 
duty  of  action  in  the  matter  of  establishing  rates  rests 
on  the  company,  and  not  primarily  on  the  consumer, 
and  the  company  will  not  be  allowed  to  plead  its  own 
negligence  and  laches  to  justify  and  excuse  its  refusal 
to  furnish  water  to  one  residing  within  the  franchise 
limit." 

The  duty  of  furnishing  service  at  reasonable  rates, 
including  that  of  fixing  the  rates  where  the  state  or 
its  agent  has  not  done  so  devolves  upon  the  municipal 
public  utility  by  implication  from  its  acceptance  of  the 
franchise  to  furnish  service,  as  does  also  its  undertak- 
ing to  exact  only  a  reasonable  charge  for  the  service 


§  453  PUBLIC    UTILITIES.  52O 

rendered,  for  as  the  court  in  the  case  of  Madison  v. 
Madison  Gas  &  Electric  Co.,  129  Wis.  249,  108  N.  W. 
65,  8  L.  R.  A.  (N.  S.)  529,  116  Am.  St.  944,  decided 
in  1906,  says:  "The  business  of  supplying  gas  and 
electricity  to  meet  the  demands  of  the  inhabitants  of 
a  community,  under  grant  of  the  state  or  of  a  munici- 
pal corporation,  is  of  a  public  nature.  It  is  in  char- 
acter a  public  business,  and,  like  that  of  common  car- 
riers, warehousemen,  and  other  enterprises,  in  which 
the  community  has  an  interest  different  from  what 
it  has  in  private  enterprises.  .  .  .  The  right  to  con- 
duct such  a  business  under  grant  from  a  municipality 
in  no  way  affects  its  character,  and  such  a  grant  is 
deemed  to  be  one  from  the  state  through  one  of  its 
municipal  agencies.  One  of  the  conditions  for  the 
exercise  of  the  privilege  of  conducting  a  gas  business, 
under  legislative  grant,  is  that,  in  the  absence  of  leg- 
islative prescription  restricting  the  rate  of  compensa- 
tion for  the  service  furnished,  the  grant  carries  by  im- 
plication the  obligation  to  furnish  it  at  a  reasonable 
price." 

§  453.  Reasonable  value  of  service  determines  the 
rate. — That  the  public  can  not  be  required  to  pay  a 
rate,  however  unreasonable,  in  order  that  the  munici- 
pal public  utility  may  be  able  to  realize  a  reasonable 
return  on  its  investment,  because  no  return  is  guaran- 
teed any  such  investment  any  more  than  in  the  case 
of  a  private  enterprise  and  that  the  rate  must  be  fixed 
in  the  light  of  the  value  of  the  service  is  stated  in  the 
case  of  Spring  Valley  Waterworks  v.  San  Francisco, 
192  Fed.  137,  decided  in  191 1,  to  the  effect  that:  "The 
public  has  a  right  to  demand  that  no  more  shall  be 
exacted  than  the  services  rendered  are  reasonably 
worth.  The  public  can  not  be  subjected  to  unreason- 
able rates,  in  order  simply  that  stockholders  may  earn 


521  REASONABLE    RATES.  §454 

dividends.  Covington  &  Lexington  T.  R.  Co.  v.  Sand- 
ford,  164  U.  S.  578,  41  L.  ed.  560;  Spring  Valley  Water 
Co.  V.  San  Francisco  (C.  C),   165  Fed.  667." 

The  case  of  Brymer  v.  Butler  Water  Co.,  179  Pa. 
231,  36  Atl.  249,  36  L.  R.  A.  260,  decided  in  1897,  in 
effect  enunciates  the  same  principle  as  the  rule  con- 
trolling the  question  of  rates  by  saying:  "Then  the 
interests  of  the  owners  of  the  property  are  to  be  con- 
sidered. They  are  entitled  to  a  rate  of  return,  if  their 
property  will  earn  it,  not  less  than  the  legal  rate  of 
interest." 

§  454.  Risk  of  investment  assumed  by  owner. — 
That  the  municipal  public  utility  necessarily  assumes 
the  risk  of  the  investment  which  it  makes  and  is  not 
guaranteed  a  fixed  return  upon  it  and  can  not  require 
its  customers  to  pay  for  the  service  furnished  at  a 
rate  which  will  assure  the  success  of  the  investment 
where  the  service  provided  far  exceeds  the  demand 
for  it  is  well  stated  and  illustrated  in  the  case  of  Bruns- 
wick &  T.  Water  Dist.  v.  Maine  Water  Co.,  99  Maine 
371,  59  Atl.  537,  decided  in  1904,  where  the  court  says: 
"A  public  service  property  may  or  may  not  have  a 
value  independent  of  the  amount  of  rates  which  for 
the  time  being  may  be  reasonably  charged.  A  public 
service  company  may,  under  some  circumstances, 
be  required  to  perform  its  service  at  rates  prohibitive 
of  a  fair  return  to  its  stockholders,  considering  their 
property  as  an  investment  merely.  Smyth  v.  Ames, 
169  U.  S.  466,  42  L.  ed.  819.  It  is  true  that  the  fair 
value  of  the  property  used  is  the  basis  of  calculation 
as  to  reasonableness  of  rates,  but,  as  was  pointed  out 
in  the  Waterville  case,  this  is  not  the  only  element  of 
calculation.  There  are  others;  as,  for  instance,  the 
risks  of  the  incipient  enterprise  on  the  one  hand,  and 
whether  all  the  property  used  is  reasonably  necessary 


9  454  PUBLIC    UTILITIES.  522 

to  the  service,  and  whether  as  a  structure  it  is  unrea- 
sonably expensive,  on  the  other.  For  a  simple  illus- 
tration, suppose  that  a  500  horsepower  engine  was 
used  for  pumping  when  a  100  horsepower  engine 
would  do  as  well.  As  property  to  be  fairly  valued,  the 
large  engine  might  be  more  valuable  than  the  smaller 
one,  yet  it  could  not  be  said  that  it  would  be  reason- 
able to  compel  the  public  to  pay  rates  based  upon  the 
value  of  the  unnecessarily  expensive  engine. 
Rates  must  be  reasonable  to  both,  and,  if  they  can 
not  be  to  both,  they  must  be  to  the  customer.  .  .  . 
We  understand  the  purport  of  this  request  to  be  that 
a  public  service  company  can  not  lawfully  charge,  in 
any  event,  more  than  the  services  are  reasonably 
worth  to  the  public  as  individuals,  even  if  the  charge 
so  limited  would  fail  to  produce  a  fair  return  to  the 
company  upon  the  value  of  its  property  or  investment. 
Such,  we  think,  is  the  law.  .  .  .  The  company  en- 
gages in  a  voluntary  enterprise.  It  is  not  compelled, 
at  the  outset,  to  enter  into  the  undertaking.  It  must 
enter,  if  at  all,  subject  to  the  contingencies  of  the  busi- 
ness, and  subject  to  the  rule  that  its  rates  must  not 
exceed  the  value  of  the  services  rendered  to  its  cus- 
tomers. ...  In  the  aspect  now  being  considered, 
the  worth  of  a  water  service  to  its  customers  does  not 
mean  what  it  would  cost  some  one  individual,  or  some 
few  individuals,  to  supply  themselves,  for  one  may  be 
blessed  with  a  spring,  and  another  may  have  a  good 
well.  It  means  the  worth  to  the  individuals  in  a  com- 
munity taken  as  a  whole." 

After  an  excellent  summary  of  the  items  to  be  con- 
sidered in  fixing  the  rate  and  determining  whether  it 
is  a  proper  one,  the  court  in  the  case  of  Home  Tel. 
Co.  V.  Carthage,  235  Mo.  644,  139  S.  W.  547,  decided 
in  191 1,  adds:  "And  in  passing  upon  the  question, 
the  fact  should  not  be  overlooked  that  no  return  what- 


523  REASONABLE    RATES.  §  454 

ever  is  guaranteed  to  the  owner  of  the  public  utility. 
Upon  that  score  it  occupies  no  better  ground  than  the 
owner  of  capital  invested  in  a  private  enterprise.  It 
follows  that  unless  the  maximum  rate  be  placed  at 
such  a  figure  as  is  above  the  average  rate  of  return 
upon  reasonably  safe  investments  in  private  ventures, 
capital  will  naturally  turn  to  channels  in  which  no 
maximum  limit  as  to  the  return  exists." 


CHAPTER  XXIII. 

WHAT    CONSTITUTES   REASONABLE    RATES. 

Section. 

455.  Reasonable  rate  question  of  fact  varying  with  conditions. 

456.  Elements  to  be  considered  in  fixing  rates. 

457.  Antagonistic  interest  of  parties  and  sliding  scale  of  rates. 

458.  Element  of  risk  of  investment  affecting  rates. 

459.  Expense  of  maintenance  and  operation. 

460.  Physical  depreciation  and  obsolescence. 

461.  No  element  of  good  will  unless  competition  in  field. 

462.  Going  concern  with  established  income. 

463.  Sliding  scale — Increased  earnings  with  decrease  in  rates. 

464.  Monopoly  eliminates  element  of  risk. 

465.  Rate  increased  with  element  of  risk. 

466.  Fixed  charges  and  maintenance  expense  and  dividends. 

467.  Obsolescence  and  physical  depreciation  operating  expense. 

468.  Functional  and  physical  depreciation  charged  to  operation  not 

added  to  capital  account. 

469.  Replacements  out  of  earnings. 

470.  Account  earnings  rather  than  capital   for  replacement  no  in- 

crease. 

471.  Competition  affects  volume  and  risk  of  business. 

472.  No  good  will  under  monopoly  for  no  choice. 

473.  Established  business  of  going  concern  with  fixed  income. 

474.  Reproduction  cost  ignores  going  concern  value. 

§  455.  Reasonable  rate  question  of  fact  varying  with 
conditions. — The  question  of  what  constitutes  a  rea- 
sonable rate  in  any  case  is  necessarily  determined  and 
controlled  by  the  facts  of  the  particular  case,  some  of 
which  are  peculiar  to  it,  and  so  it  is  impossible  to  lay 
down  rules  of  general  application  which  will  entirely 
solve  the  question  in  all  cases.  Because  of  the  many 
items  and  changing  conditions  affecting  each  case, 
some  of  which  always  distinguish  it  from  every  other, 
the  solution  of  the  question  as  to  what  constitutes 
524 


525  REASONABLE    RATES.  §  456 

reasonable  rates  is  exceedingly  difficult,  and  only  gen- 
eral principles,  which  are  fairly  and  equally  applicable 
to  all  cases  so  far  as  they  have  facts  in  common,  can 
be  established  and  employed  for  the  determination  of 
the  rate  in  any  particular  case. 

§  456.  Elements  to  be  considered  in  fixing  rates. 
— The  result  reached  by  the  application  of  the  well- 
established  general  rule  that  the  municipal  public  util- 
ity is  entitled  to  a  reasonable  return  on  the  fair  value 
of  its  investment  is  necessarily  affected  by  a  consid- 
eration of  the  nature  and  extent  of  the  element  of 
risk  or  hazard  involved  in  each  particular  investment, 
whether  the  corporation  is  secured  as  a  monopoly  or 
whether  there  is  competition  presently  or  prospective- 
ly in  the  field,  the  expense  of  operation  and  mainte- 
nance, including  functional  depreciation  or  obsoles- 
cence, and  that  due  to  the  ordinary  wear  and  tear  of 
operation,  commonly  known  as  physical  depreciation. 
All  of  these  items  covering  the  investment  and  the 
cost  of  maintenance  and  operation  must  be  given  full 
consideration  in  determining  a  rate  for  the  service, 
which  will  provide  fair  earnings  and  proper  returns 
on  the  investment.  In  ascertaining  the  value  of  the 
service  to  the  customer,  which  is  the  economic  point 
of  view,  or  its  cost  to  the  municipal  public  utility, 
which  is  the  legal  attitude  in  the  solution  of  the  prob- 
lem, all  these  questions  must  be  fully  and  fairly  con- 
sidered, as  well  as  those  of  the  effect  of  improving  the 
service  or  reducing  the  rate  as  a  means  of  increasing 
the  volume  of  the  business  and  the  amount  of  the  net 
income  realized  from  it,  besides  the  expenditure  nec- 
essary to  establish  the  business  as  a  going  concern 
with  the  largest  possible  number  of  customers  receiv- 
ing satisfactory  service. 


§  457  PUBLIC    UTILITIES.  526 

§  457.  Antagonistic  interest  of  parties  and  sliding 
scale  of  rates. — The  question  of  what  is  a  fair  or  proper 
rate  or  what  constitutes  a  reasonable  return  on  the  fair 
value  of  the  investment  can  only  be  determined  after 
an  accurate  valuation  of  the  investment  has  been  made 
and  the  cost  of  operation  and  maintenance,  including 
the  various  forms  of  depreciation  and  any  other  legiti- 
mate items  of  expense  necessary  to  provide  satisfac- 
tory service,  has  been  determined  with  a  view  of  as- 
certaining what  at  a  given  rate  would  be  the  net  earn- 
ings of  the  company.  The  interest  of  the  two  parties, 
the  producer  and  the  consumer,  are  naturally  always 
antagonistic,  but  it  may  be  possible  to  harmonize  them 
to  a  degree  by  an  application  of  the  so-called  sliding 
scale  of  rates  which  permits  the  municipal  public 
utility  to  realize  an  increasing  return  on  its  invest- 
ment in  proportion  to  the  decreasing  rate  of  its  service 
on  the  condition  that  the  standard  of  the  service 
remain  fixed  and  the  company  be  required  to  main- 
tain service  up  to  that  standard. 

§  458.  Element  of  risk  of  investment  affecting 
rates. — The  element  of  risk  or  hazard  involved  in  the 
investment  necessary  to  maintain  a  municipal  public 
utility  and  furnish  its  service  is  properly  considered 
in  fixing  the  rate  of  return  on  the  investment  because 
the  element  of  uncertainty  not  only  as  to  the  return 
from  the  investment,  but  as  to  the  security  of  the 
investment  itself  justifies  an  increasing  return  in  pro- 
portion to  the  risk  involved  in  the  investment  neces- 
sarily made  to  conduct  the  enterprise.  This  fact  is 
recognized  in  the  making  of  investments  generally, 
for  the  rate  of  return  decreases  with  the  element  of 
risk  so  that  the  return  realized  on  government  bonds 
or  other  equally  good  securities  is  a  minimum  rate 
while    the    possible    returns    of    a    pioneer    investment, 


527  REASONABLE    RATES.  §  459 

which  must  necessarily  look  to  future  development 
for  the  most  of  its  business  upon  which  to  realize 
profits,  or  where  the  undertaking  must  develop  its  own 
trade  and  attract  customers  to  it,  is  necessarily  and 
properly  above  that  received  on  a  staple  investment. 
This  added  inducement  of  a  possible  increased  rate  of 
return  is  necessary  to  induce  capital  to  enter  hazardous 
enterprises  or  attempt  to  develop  a  business  in  pioneer 
fields  or  to  establish  or  develop  an  industry  new  to 
any  particular  locality. 

§  459.     Expense  of  maintenance  and  operation. — It 

is  axiomatic  that  the  expense  of  operation  and  main- 
tenance which  is  always  required  to  furnish  efficient 
service  must  be  met  out  of  the  proceeds  received  for 
the  service  rendered,  because  this  expense  is  necessary 
and  must  be  met  as  a  condition  precedent  to  the  con- 
tinued maintenance  of  the  business  and  its  operation 
necessary  to  furnish  its  service.  Where  this  element 
is  not  properly  recognized  the  service  necessarily  suf- 
fers and  the  plant  depreciates  with  the  result  that  in  a 
comparatively  short  period  the  service  becomes  unsat- 
isfactory and  entirely  insufficient. 

§  460.  Physical  depreciation  and  obsolescence. — 
The  item  of  functional  depreciation  or  obsolescence  is 
equally  important  with  that  of  ordinary  physical  de- 
preciation which  is  common  to  the  operation  of  all 
municipal  public  utilities,  for  the  replacing  of  machin- 
ery and  other  equipment  of  the  modern  plant  em- 
ploying electricity  or  some  other  recently  discovered 
force,  upon  which  the  element  of  invention  and  im- 
provement is  so  frequently  making  such  decided 
changes  in  the  manner  of  operating  and  providing 
service,  necessitates  the  abandonment  of  the  machinery 
and  other  equipment  then  on  hand  for  the  new  inven- 


§  461  PUBLIC    UTILITIES.  528 

tion  or  discovery  of  a  different  force  or  an  improved 
method  of  utilizing  that  already  discovered.  In  order 
to  furnish  the  best  service  the  most  approved  methods, 
machinery  and  equipment  available  at  any  particular 
time  are  necessary,  and  this  requires  that  the  equip- 
ment then  on  hand,  no  matter  how^  recently  acquired 
nor  how  perfect  its  condition  which  has  become  obso- 
lete, be  abandoned.  Adequate  service  means  the  best 
that  is  available  furnished  under  the  latest  and  most 
approved  methods.  In  such  cases  it  is  necessary  to 
replace  equipment,  not  when  that  on  hand  is  worn  out 
and  no  longer  capable  of  serving  the  purpose  for  which 
it  was  acquired,  but  at  any  time  that  a  better  and  more 
improved  instrument  for  furnishing  the  service  is 
placed  on  the  market,  and  this  necessarily  results  in 
consigning  the  former  equipment  to  the  scrap  heap  as 
though  it  were  entirely  worn  out.  The  loss  therefore 
due  to  functional  depreciation,  as  well  as  to  ordinary 
physical  depreciation,  must  be  considered  an  expense 
of  operation.  This  item,  however,  must  be  charged 
to  the  expense  of  operation  rather  than  added  to  the 
capitalization  upon  which  dividends  are  expected,  be- 
cause it  is  a  current  expense  incurred  in  connection 
with  operation  and  not  a  new  increased  investment  of 
capital  in  the  business. 

§  461,  No  element  of  good  will  unless  competition 
in  field. — Where  the  element  of  competition  is  lacking 
so  that  the  municipal  public  utility  enjoys  the  privilege 
of  furnishing  all  the  service  due  to  the  fact  that  it 
has  an  actual  monopoly  of  the  field,  the  stability  of 
the  investment,  as  well  as  the  probability  of  perma- 
nently realizing  profits,  justifies  a  reduction  of  the 
rate  in  the  form  of  regulation,  as  compared  with  a 
case  where  there  is  competition  in  the  field,  for  this 
necessarily  restricts   the   volume   of  the   business   and 


529  REASONABLE    RATES.  §  462 

injects  an  element  of  risk  and  uncertainty  in  the  ques- 
tion. Where  the  degree  of  uncertainty  is  controlled 
by  the  difference  between  the  two  cases — one  where 
the  franchise  is  practically  exclusive  for  the  time  being 
and  the  other  where  it  is  legally  or  actually  so,  and 
the  company  enjoys  an  actual  monopoly  of  the  busi- 
ness, the  element  of  good  will  is  not  properly  included, 
because  its  customers  are  retained  by  compulsion,  as 
they  are  obliged  to  accept  service  from  the  particular 
municipal  public  utility  or.  go  without.  As  the  element 
of  good  will  necessarily  involves  the  right  of  the  cus- 
tomer to  choose,  where  there  is  no  such  right  because 
the  municipal  public  utility  enjoys  a  monopoly  of  the 
business,  this  element  should  be  disregarded. 

§  462.  Going  concern  v^dth  established  income. — 
The  fact  that  the  municipal  public  utility  is  a  going 
concern  and  has  an  established  business  with  the  nec- 
essary connections  made  to  furnish  its  service  and 
is  actually  furnishing  satisfactory  service  to  its  cus- 
tomers is  an  element  properly  included  in  the  invest- 
ment in  fixing  the  rate  for  the  service.  The  fact  that  the 
company  is  a  going  concern  in  full  operation,  not  only 
with  the  capacity  to  furnish  service  and  to  enjoy  the 
value  received  therefor,  but  that  it  is  a  system  actu- 
ally supplying  service  and  enjoying  a  fixed  income 
from  the  earnings  of  such  service  is  an  important  and 
essential  feature  which  is  properly  included  as  an  ex- 
penditure of  such  a  business  in  determining  by  a  valu- 
ation the  amount  of  the  investment  on  which  the  com- 
pany is  entitled  to  receive  a  reasonable  income. 

§  463.  Sliding  scale — Increased  earnings  with  de- 
crease in  rates. — The  fixed  rate  can  be  reduced  with- 
out materially  affecting  the  net  income  by  improving 
the  service  and  extending  the  field  to  which  the  service 
is  furnished  because  a  reduction  in  the  rates  as  well  as 

34— Pub.  ut. 


§  463  PUBLIC    UTILITIES.  53O 

the  improvement  and  extension  of  the  service  will 
naturally  result  in  increasing  the  volume  of  the  busi- 
ness with  the  effect  of  increasing  the  net  income  sufifi- 
ciently  to  permit  of  a  reduction  in  the  rates  without 
actually  decreasing  the  income,  unless  it  be  in  the  case 
of  the  municipal  pubhc  utility  providing  telephone 
service  where  the  increase  in  the  volume  of  the  busi- 
ness seems  not  to  be  attended  with  the  ordinary  rela- 
tive decrease  in  the  cost  of  the  service  or  the  expense 
of  operating  the  system.  Recognition  of  this  fact  is 
the  basis  of  the  so-called  sliding  scale,  whereby  the 
income  which  the  municipal  public  utility  is  permitted 
to  earn  is  increased  as  the  rate  charged  for  the  service 
rendered  is  decreased.  That  the  desire  for  increasing 
the  amount  of  the  income,  which  under  this  system 
automatically  decreases  the  rate  received  for  the  serv- 
ice, may  not  result  in  decreasing  the  standard  and 
quality  of  the  service  and  such  depreciation  of  the 
plant  as  ultimately  to  result  in  its  destruction,  the 
application  of  the  sliding  scale  as  a  method  of  regulat- 
ing rates  must  be  accompanied  by  a  definite  standard 
of  service  and  a  strict  requirement  that  the  service 
be  kept  up  to  the  standard.  With  this  safeguard,  how- 
ever, the  plan  in  certain  cases  is  advantageous  in  that 
it  furnishes  a  motive  for  the  municipal  public  utility 
voluntarily  to  reduce  its  rates  which  is  naturally  ac- 
companied by  an  increase  in  the  volume  of  its  business 
and  so  by  a  net  increase  in  its  income.^ 

1  ALABAMA. — Bessemer  v.  Bessemer  Waterworks,  152  Ala.  391, 
44  So.  663. 

ARKANSAS.— Arkadelphia  E.  L.  Co.  v.  Arkadelphia,  99  Ark. 
178,  137  S.  W.  1093. 

CALIFORNIA.— Contra  Costa  Water  Co.  v.  Oakland,  159  Cal.  323, 
113  Pac.  668;  San  Diego  Water  Co.  v.  San  Diego,  118  Cal.  556,  50 
Pac.  633,  38  L.  R.  A.  460,  62  Am.  St.  261. 

COLORADO.— Montezuma  County  v.  Montezuma  Water  &  Land 
Co.,  39  Colo.  166,  89  Pac.  794. 

FEDERAL.— Boise  City  Irrig.  &  Land  Co.  v.  Clark,  131  Fed.  415; 


531  REASONABLE    RATES.  §464 

§  464.  Monopoly  eliminates  element  of  risk. — That 
the  element  of  risk  is  properly  and  necessarily  included 
in  the  determination  of  the  proper  rate  which  the 
municipal  public  utility  should  receive  for  its  service 
is   a   commonplace   in   business   and   a   well   recognized 

C.  H.  Venner  Co.  v.  Urbana  Waterworks,  174  Fed.  348;  Consolidated 
Gas  Co.  V.  New  York,  157  Fed.  849;  Contra  Costa  Water  Co.  v.  Oak- 
land, 165  Fed.  518;  Cumberland  Tel.  &  T.  Co.  v.  Railroad  Commis- 
sion, 156  Fed.  823;  National  Waterworks  Co.  v.  Kansas  City,  62  Fed. 
853,  27  L.  R.  A.  827;  Owensboro  v.  Cumberland  Tel.  &  T.  Co.,  174 
Fed.  739;  Palatka  Waterworks  v.  Palatka,  127  Fed.  161;  Postal  Cable 
Tel.  Co.  V.  Cumberland  Tel.  &  T.  Co.,  177  Fed.  726;  Spring  Valley 
Waterworks  v.  San  Francisco,  124  Fed.  574;  Spring  Valley  Water- 
works V.  San  Francisco,  192  Fed.  137. 

IDAHO.— Pocatello  v.  Murray,  21  Idaho  180,  120  Pac.  812. 

ILLINOIS.— Chicago  v.  Rogers  Park  Water  Co.,  214  111.  212,  73 
N.  E.  375. 

IOWA.— Cedar  Rapids  Gaslight  Co.  v.  Cedar  Rapids,  144  Iowa 
426,  120  N.  W.  966,  138  Am.  St.  299,  223  U.  S.  655,  56  L.  ed.  594;  Des 
Moines  v.  Des  Moines  Waterworks  Co.,  95  Iowa  34S,  64  N.  W.  269. 

KANSAS.— Galena  Water  Co.  v.  Galena,  74  Kans.  644,  87  Pac. 
735. 

MAINE.— Brunswick  &  T.  Water  Dist.  v.  Maine  Water  Co.,  99 
Maine  371,  59  Atl.  537;  Kennebec  Water  Dist.  v.  Waterville,  97  Maine 
185,  54  Atl.  6,  60  L.  R.  A.  856. 

MASSACHUSETTS.— Gloucester  Water-Supply  Co.  v.  Gloucester, 
179  Mass.  365,  60  N.  E.  977;  Newburyport  Water  Co.  v.  Newburyport, 
16S  Mass.  541,  47  N.  E.  533. 

MISSOURI.— Home  Tel.  Co.  v.  Carthage,  235  Mo.  644.  130  S.  W. 
547. 

NEW  JERSEY.— Public  Service  Gas  Co.  v.  Board  of  Public 
Utility  Commissioners   (N.  J.),  87  Atl.  651. 

NEW  YORK.— People  ex  rel.  Binghampton  Light.  &c.,  Co.  v. 
Stevens,  203  N.  Y.  7,  96  N.  E.  114;  People  ex  rel.  Brooklyn  Heights 
R.  Co.  V.  State  Board  of  Tax  Comrs.,  127  N.  Y.  S.  825;  People  ex  rel. 
Queens  Co.  Water  Co.  v.  Woodbury,  202  N.  Y.  619,  123  N.  Y.  S.  599,  96 
N.  E.  1127;  People  ex  rel.  Third  Ave.  R.  Co.  v.  State  Board  of  Tax 
Comrs.,  198  N.  Y.  60S,  120  N.  Y.  S.  52S,  92  N.  E.  109S;  Silkman  v. 
Board  of  Water  Comrs.  of  Yonkers,  152  N.  Y.  327.  46  N.  E.  612.  37  L. 
R.  A.  827.  71  Hun  (N.  Y.)  37;  People  ex  rel.  King's  County  Light- 
ing Co.  V.  Willcox,  (N.  Y.),  141  N.  Y.  Supp.  677;  Hopper  v.  Willcox 
(N.  Y.).  140  N.  Y.  S.  277. 

NORTH  CAROLINA.— Horner  v.  Oxford  Water  &  Electric  Co.. 
153  N.  Car.  535,  69  S.  E.  607. 


§  464  PUBLIC    UTILITIES.  532 

legal  principal.  The  amount  allowed  on  account  of 
this  element,  however,  is  naturally  determined  by  the 
extent  of  the  risk  in  the  case,  and  where  the  business 
is  so  well  established  that  it  enjoys  practically  a  mo- 
nopoly of  the  field,  this  element  of  security  almost  en- 
tirely eliminates  that  of  the  risk  or  hazard,  for  as  the 
court  in  the  case  of  Willcox  v.  Consolidated  Gas  Co.,  212 
U.  S.  19,  53  L.  ed.  382,  decided  in  1909,  says:  "The 
less  risk,  the  less  right  to  any  unusual  returns  upon 
the  investments.  One  who  invests  his  money  in  a 
business  of  a  somewhat  hazardous  character  is  very 
properly  held  to  have  the  right  to  a  larger  return, 
without  legislative  interference,  than  can  be  obtained 
from  an  investment  in  government  bonds  or  other  per- 
fectly safe  security.  .  .  .  In  an  investment  in  a  gas 
company,  such  as  complainant's,  the  risk  is  reduced 
almost  to  a  minimum.     It  is  a  corporation  which,   in 


OKLAHOMA.— Hine  v.  Wadlington,  33  Okla.  173,  124  Pac.  299; 
Pioneer  Tel.  &  T.  Co.  v.  Westenhaver,  29  Okla.  429,  118  Pac.  354, 
38  L.  R.  A.  (N.  S.)  1209. 

PENNSYLVANIA.— Brymer  v.  Butler  Water  Co.,  179  Pa.  231,  36 
All.  249,  36  L.  R.  A.  260. 

RHODE  ISLAND.— Bristol  v.  Bristol  &  W.  Waterworks,  23  R. 
I.  274,  49  Atl.  974. 

UNITED  STATES.— Knoxville  v.  Knoxville  Water  Co.,  212  U.  S. 
1,  53  L.  ed.  371;  Lincoln  Gas  &  E.  L.  Co.  v.  Lincoln,  223  U.  S.  349, 
56  L.  ed.  466;  Omaha  v.  Omaha  Water  Co.,  218  U.  S.  180,  54  L.  ed. 
991;  Railroad  Commission  of  La.  v.  Cumberland  Tel.  &  T.  Co.,  212  U. 
S.  414,  53  L.  ed.  577;  San  Diego  Land  &  Town  Co.  v.  Jasper,  189  U.  S. 
439,  47  L.  ed.  892;  San  Diego  Land  &  Town  Co.  v.  National  City,  174 
U.  S.  739,  43  L.  ed.  1154;  Smyth  v.  Ames,  169  U.  S.  466,  42  L.  ed.  819; 
Spring  Valley  Waterworks  v.  Schottler,  110  U.  S.  347,  28  L.  ed.  173; 
Stanislaus  County  v.  San  Joaquin  &  K.  R.  C.  &  I.  Co.,  192  U.  S.  201, 
48  L.  ed.  406;  Willcox  v.  Consolidated  Gas  Co.,  212  U.  S.  19,  53  L. 
ed.  382;   Simpson  v.  Shephard,  229  U.  S.  — ,  33  Sup.  Ct.  Rep.  729. 

WASHINGTON.— Puget  Sound  Electric  R.  v.  Railroad  Commis- 
sion, 65  Wash.  75,  117  Pac.  739. 

WISCONSIN.— State  ex  rel.  Hallauer  v.  Gosnell,  116  Wis.  606, 
93  N.  W.  542,  61  L.  R.  A.  33;  Appleton  Waterworks  Co.  v.  Railroad 
Commission     (Wis.),  142  N.  W.  476. 


533  REASONABLE    RATES.  §  465 

fact,  as  the  court  below  remarks,  monopolizes  the  gas 
service  of  the  largest  city  in  America,  and  is  secure 
against  competition  under  the  circumstances  in  which 
it  is  placed,  because  it  is  a  proposition  almost  un- 
thinkable that  the  city  of  New  York  would,  for  pur- 
poses of  making  competition,  permit  the  streets  of 
the  city  to  be  again  torn  up  in  order  to  allow  the 
mains  of  another  company  to  be  laid  all  through  them 
to  supply  gas  which  the  present  company  can  ade- 
quately  supply." 

§  465.     Rate  increased  with  element  of  risk. — The 

court  in  the  case  of  Brunswick  &  T.  Water  Dist.  v. 
Maine  Water  Co.,  99  Maine  371,  59  Atl.  537,  decided 
in  1904,  recognizes  this  as  an  element  in  determining 
the  proper  rate  and  indicates  that  the  rate  of  return 
should  increase  as  the  element  of  risk  increases,  for 
as  the  court  says :  "A  public  service  company  may, 
under  some  circumstances,  be  required  to  perform  its 
service  at  rates  prohibitive  of  a  fair  return  to  its  stock- 
holders, considering  their  property  as  an  investment 
merely.  Smyth  v.  Ames,  169  U.  S.  466,  42  L.  ed.  819. 
It  is  true  that  the  fair  value  of  the  property  used  is 
the  basis  of  calculation  as  to  reasonableness  of  rates, 
but,  as  was  pointed  out  in  the  Waterville  case,  this  is 
not  the  only  element  of  calculation.  There  are  others; 
as,  for  instance,  the  risks  of  the  incipient  enterprise 
on  the  one  hand,  and  whether  all  the  property  used  is 
reasonably  necessary  to  the  service,  and  whether  as  a 
structure  it  is  unreasonably  expensive,  on  the  other. 
.  .  .  An  equivalent  to  the  prevailing  rate  of  in- 
terest might  be  a  reasonable  return,  and  it  might  not. 
It  might  be  too  high  or  it  might  be  too  low.  It  might 
be  reasonable,  owing  to  peculiar  hazards  or  difficulties 
in  one  place  to  receive  greater  returns  there  than  it 
would   in   another  upon   the   same   investment.     Then, 


§  466  PUBLIC   UTILITIES.  534 

their  reasonableness  relates  to  both  the  company  and 
the  customer.  Rates  must  be  reasonable  to  both,  and, 
if  they  can  not  be  to  both,  they  must  be  to  the  cus- 
tomer. .  .  .  We  understand  the  purport  of  this  re- 
quest to  be  that  a  public  service  company  can  not 
lawfully  charge,  in  any  event,  more  than  the  services 
are  reasonably  worth  to  the  public  as  individuals,  even 
if  a  charge  so  limited  would  fail  to  produce  a  fair  return 
to  the  company  upon  the  value  of  its  property  or  in- 
vestment. Such,  we  think,  is  the  law.  .  .  .  The 
company  engages  in  a  voluntary  enterprise.  It  is  not 
compelled,  at  the  outset,  to  enter  into  the  undertaking. 
It  must  enter,  if  at  all,  subject  to  the  contingencies  of 
the  business,  and  subject  to  the  rule  that  its  rates  must 
not  exceed  the  value  of  the  services  rendered  to  its 
customers." 

§  466.  Fixed  charges  and  maintenance  expense 
and  dividends. — That  the  necessary  expenses  of  main- 
tenance and  operation  must  be  met  out  of  the  proceeds 
received  from  the  service  of  the  municipal  public 
utility  is  an  absolute  necessity  which  the  courts  have 
never  questioned.  As  the  court  in  the  case  of  Contra 
Costa  Water  Co.  v.  Oakland,  165  Fed.  518,  decided  in 
1904,  says:  "The  complainant  undoubtedly  has  the 
right  to  receive  from  water  rates  an  income  which 
will  enable  it  to  pay  its  actual  operating  expenses, 
its  taxes,  its  interest  on  its  bonded  or  other  indebted- 
ness so  far  as  that  indebtedness  represents  money 
properly  expended  in  or  upon  its  property,  and  to  pay 
a  reasonable  dividend  on  its  stock  so  far  as  the  stock 
represents  money  actually  received  and  so  invested, 
and  in  addition  thereto  to  receive  a  sum  sufficient 
to  cover  the  annual  depreciation  of  its  plant." 

§  467.  Obsolescence  and  physical  depreciation  op- 
erating expense. — There  are  two  kinds  of  depreciation. 


535  REASONABLE    RATES.  §  467 

that  due  to  the  ordinary  physical  wear  of  operation 
and  functional  depreciation  which  results  from  the 
necessary  replacement  of  equipment  before  it  is  worn 
out  by  invention  and  improved  appliances  which  ren- 
der more  efficient  and  satisfactory  service.  The  ex- 
pense of  depreciation,  whether  ordinary  and  physical 
or  functional,  due  to  the  machinery,  although  not  worn 
out,  becoming  obsolete  by  reason  of  further  invention 
is  equally  chargeable  to  maintenance  and  the  expense 
of  operation,  for  as  the  court  in  the  case  of  People  ex 
rel.  Brooklyn  Heights  R.  Co.  v.  State  Board  of  Tax 
Comrs.,  127  N.  Y.  S.  825,  decided  in  1910,  in  fixing  the 
valuation  of  a  municipal  public  utility  plant  for  the 
sake  of  taxation  said :  "As  surely  as  humanity  travels 
to  the  grave,  the  machinery  and  equipment  of  a  public 
service  corporation  travel  toward  the  scrap  pile.  The 
plant  and  structures  depreciate  in  less  degree,  but  as 
certainly.  This  is  ordinary  depreciation.  But  another 
form  of  depreciation  in  the  case  of  properties  here  be- 
ing valued  takes  place.  The  machinery  or  equipment, 
while  still  capable  of  years  of  service,  becomes  in- 
adequate to  do  the  work  demanded — not  only  by  the 
corporation,  but  by  the  law  itself.  In  the  case  par- 
ticularly of  electrical  machinery,  the  type  becomes 
obsolete  by  reason  of  invention,  and  increasing  public 
demands  frequently  require  in  aid  of  safe  and  adequate 
service  that  the  obsolete  appliance  or  equipment  give 
way  to  the  new.     .     .  This  would  appear  to  be  a 

legislative  recognition  of  the  systems  adopted  provid- 
ing for  the  charge,  out  of  income,  of  items  for  obso- 
lescence and  inadequacy,  upon  a  plan  which  apparently 
according  to  the  state  was  reasonably  capable  of  as- 
certainment from  the  experience  of  the  corporation 
itself.  The  policy  of  the  state  today,  so  reflected  by 
statute,  is  in  favor  of  these  charges  out  of  earnings. 
.     .     .     The  corporations  must  provide  under  the  pres- 


§  467  PUBLIC    UTILITIES.  536 

ent  statute  safe  and  adequate  service.  Upon  this  the 
statute  is  insistent,  and  the  highest  power  has  been 
conferred  upon  the  commission  to  see  that  this  pro- 
vision of  the  lav^  is  comphed  with.  To  provide  safe 
and  adequate  service  is  not  to  maintain  old  and  obso- 
lete cars,  even  though  by  constant  repair  they  may  be 
kept  from  dissolution.  It  is  to  keep  in  touch  with  the 
times,  and  to  displace  obsolete  or  inadequate  appli- 
ances or  structures  with  new  and  approved  appliances. 
These  expenditures  come  suddenly  in  some  cases — in 
others  their  approach  may  be  apprehended." 

The  same  court  in  the  case  of  People  ex  rel.  Bing- 
hampton  Light,  &c.,  Co.  v.  Stevens,  203  N.  Y.  7,  96 
N.  E.  114,  decided  in  1911,  recognized  the  same  prin- 
ciple in  holding  that:  "A  reasonable  consideration  of 
the  interests  of  a  corporation  and  the  ultimate  good 
of  its  stock  and  bondholders,  and  a  regard  for  the  in- 
vesting public  and  that  fair  dealing  which  should  be 
observed  in  all  business  transactions,  require  that  ma- 
chines and  tools  paid  for  and  charged  to  capital  ac- 
count, but  which  necessarily  become  obsolete  or  wholly 
worn  out  within  a  period  of  years  after  the  same  are 
purchased  or  installed,  should  be  renewed  or  replaced 
by  setting  aside  from  time  to  time  an  adequate  amount 
in  the  nature  of  a  sinking  fund  or  that  by  some  other 
system  of  financing  the  corporation  put  upon  the  pur- 
chaser from  the  corporation  the  expense  not  alone  of 
the  daily  maintenance  of  the  plant,  but  a  just  propor- 
tion of  the  expense  of  renewing  and  replacing  that 
part  of  the  plant  which,  although  not  daily  consumed, 
must  necessarily  be  practically  consumed  within  a 
given  time.  If  that  is  not  done,  and  renewals  and 
replacements  are  continually  added  to  the  capital  ac- 
count, the  capital  account  must  necessarily  become 
more  and  more  out  of  proportion  to  the  real  value  of 
the  property  of  the  corporation." 


537  REASONABLE    RATES.  §  468 

§  468.  Functional  and  physical  depreciation  charged 
to  operation  not  added  to  capital  account. — The  same 
court  in  the  case  of  People  ex  rel.  Queens  Co.  Water 
Co.  V.  Woodbury,  202  N.  Y.  619,  96  N.  E.  1127,  123 
N.  Y.  S.  599,  decided  in  1910,  recognized  and  gave 
expression  to  this  principle  by  saying  that:  "So  long 
as  depreciation  of  property  is  a  proper  factor  to  take 
into  account  in  determining  the  net  earnings,  I  can 
not  see  why  the  rule  should  not  be  applied  as  well  to 
functional  as  to  physical  depreciation.  In  both  cases 
the  property  becomes  valueless,  because  no  longer 
capable  of  being  applied  to  the  purposes  for  which  it 
was  designed.  It  would  be  a  false  system  of  account- 
ing which  did  not  take  into  consideration  the  destruc- 
tion of  the  value  of  property,  from  whatever  cause, 
so  long  as  that  cause  is  in  constant  operation  and  can 
be  foreseen  with  reasonable  certainty.  A  loss  due  to 
functional  depreciation  is  incurred  in  the  operation  of 
the  business,  and  therefore  should  be  charged  as  an 
expense  of  operation.  City  of  Knoxville  v.  Knoxville 
Water  Company,  212  U.  S.  i,  53  L.  ed.  371.  Machin- 
ery which  today  is  sufficient  for  its  purpose  may  be- 
come scrap  iron  through  the  development  of  inven- 
tions, and  so  pipes  and  mains  sufficient  for  a  system 
of  water  supply  as  it  now  exists  may  become  valueless 
through  changes  in  the  conditions  under  which  it  is 
used." 

§  469.  Replacements  out  of  earnings. — The  Su- 
preme Court  of  the  United  States  has  recognized  this 
principle  in  the  case  of  Knoxville  v.  Knoxville  Water 
Co..  212  U.  S.  I,  53  L.  ed.  371,  decided  in  1909,  by 
holding  that :  "The  cost  of  reproduction  is  one  way 
of  ascertaining  the  present  value  of  a  plant  like  that 
of  a  water  company,  but  that  test  would  lead  to  ob- 
viously incorrect  results  if  the  cost  of  reproduction  is 


§  470  PUBLIC   UTILITIES.  538 

not  diminished  by  the  depreciation  which  has  come 
from  age  and  use.  .  .  .  It  is  not  easy  to  fix  at  any 
given  time  the  amount  of  depreciation  of  a  plant  whose 
component  parts  are  of  different  ages,  with  different 
expectations  of  Hfe.  But  it  is  clear  that  some  sub- 
stantial allowance  for  depreciation  ought  to  have 
been  made  in  this  case.  .  .  .  Before  coming  to  the 
question  of  profit  at  all  the  company  is  entitled  to 
earn  a  sufficient  sum  annually  to  provide  not  only  for 
current  repairs,  but  for  making  good  the  depreciation 
and  replacing  the  parts  of  the  property  when  they 
come  to  the  end  of  their  life.  The  company  is  not 
bound  to  see  its  property  gradually  waste,  without 
making  provision  out  of  earnings  for  its  replacement. 
It  is  entitled  to  see  that  from  earnings  the  value  of 
the  property  invested  is  kept  unimpaired,  so  that,  at 
the  end  of  any  given  term  of  years,  the  original  in- 
vestment remains  as  it  was  at  the  beginning." 

§  470.  Account  earnings  rather  than  capital  for 
replacement  no  increase. — That  the  expense  due  to 
depreciation,  however,  should  not  be  added  or  charged 
to  the  account  of  capital  because  it  involves  the  mere 
replacement  of  equipment  which  is  concerned  with 
the  expense  of  operation  and  maintenance  rather  than 
with  the  permanent  investment  upon  which  returns 
by  way  of  dividends  are  payable  is  the  effect  of  the 
decision  in  the  case  of  Railroad  Commission  of  La.  v. 
Cumberland  Tel.  &  T.  Co.,  212  U.  S.  414,  53  L.  ed. 
577,  decided  in  1909,  where  the  court  says:  "It  was 
obligatory  upon  the  complainant  to  show  that  no  part 
of  the  money  raised  to  pay  for  depreciation  was  added 
to  capital,  upon  which  a  return  was  to  be  made  to 
stockholders  in  the  way  of  dividends  for  the  future. 
.  .  .  If  that  were  allowable,  it  would  be  collecting 
money  to   pay  for   depreciation   of  the   property,    and, 


539  REASONABLE    RATES.  §  47I 

having  collected  it,  to  use  it  in  another  way,  upon 
which  the  complainant  would  obtain  a  return  and  dis- 
tribute it  to  its  stockholders.  ...  In  these  cases 
[gas,  water,  transportation,  etc.],  increased  profits 
might  be  the  result  of  decreased  rates.  But  with  tele- 
phone companies,  as  shown  by  the  testimony  of  the 
president  of  the  complainant,  the  reduction  in  toll 
rates  does  not  bring  an  increased  demand  except  upon 
the  condition  of  corresponding  increase  in  expenses." 

§  471.  Competition  affects  volume  and  risk  of 
business. — That  the  rate  received  for  service  rendered 
is  properly  regulated  with  reference  to  the  question 
as  to  whether  the  municipal  public  utility  enjoys  a 
monopoly  of  the  business  or  is  obliged  to  meet  com- 
petitive conditions  is  a  well-established  legal  and  busi- 
ness principle,  for  it  necessarily  affects  the  volume  of 
the  business  available  to  the  municipal  public  utility 
and  also  determines  the  element  of  risk  or  uncertainty 
in  the  future  prospects  of  the  business,  for  as  the  court 
in  the  case  of  Kennebec  Water  Dist.  v.  Waterville,  97 
Maine  185,  54  Atl.  6,  60  L.  R.  A.  856,  decided  in  1902, 
says:  "The  elemental  principles  thus  far  noted  may 
be  summarized  as,  on  the  one  hand,  the  right  of  the 
company  to  derive  a  fair  income,  based  upon  the  fair 
value  of  the  property  at  the  time  it  is  being  used  for 
the  public,  taking  into  account  the  cost  of  maintenance 
or  depreciation,  and  current  operating  expenses;  and, 
on  the  other  hand,  the  right  of  the  public  to  have 
no  more  exacted  than  the  services  in  themselves  are 
worth.  .  .  .  And  we  say  that  the  fact  that  the  com- 
pany was  doing  its  business  without  competition  may 
and  should  be  considered  by  the  appraisers  when  they 
are  valuing  the  property  of  the  defendant  as  a  going 
concern.  That  fact  is  one  of  the  characteristics  of 
the  going  business,   and  may  enhance  its  value.     We 


§  472  PUBLIC    UTILITIES.  54O 

are  considering  now  only  the  legal  situation  of  the 
company.  There  is  a  difference  between  a  franchise 
which  is  practically  exclusive  and  one  which  is  actu- 
ally exclusive,  as  there  is  a  difference  between  uncer- 
tainty and  certainty.  The  distinction  is  vital  in  prin- 
ciple, and  it  may  be  important  in  fixing  value." 

§  472.     No  good  v^ll  under  monopoly  for  no  choice. 

— Where  the  element  of  monopoly  exists,  that  of  good 
will  should  not  be  included,  because  there  is  no  choice 
left  the  customer  who  must  resort  to  the  one  source 
of  supply  for  the  service,  for  as  the  court  in  the  case 
of  Cedar  Rapids  Gaslight  Co.  v.  Cedar  Rapids,  144 
Iowa,  426,  120  N.  W.  966,  138  Am.  St.  299,  223  U.  S. 
655,  56  L.  ed.  594,  decided  in  1909,  says:  "Save  as 
above  indicated,  the  element  of  value  designated  a 
*going  concern'  is  but  another  name  for  'good  will,' 
which  is  not  to  be  taken  into  account  in  a  case  like 
this,  where  the  company  is  granted  a  monopoly.  Cedar 
Rapids  Water  Company  v.  City  of  Cedar  Rapids,  118 
Iowa  234,  91  N.  W.  1081 ;  Willcox  v.  Consolidated 
Gas  Co.,  212  U.  S.  19,  53  L.  ed.  382." 

The  same  principle  is  recognized  and  given  expres- 
sion in  the  case  of  Bristol  v.  Bristol  &  W.  Waterworks, 
23  R.  I.  274,  49  Atl.  974,  decided  in  1901,  where  the 
court  says:  "The  subject  of  this  sale  consists  of — 
first,  certain  material  things,  the  value  of  which  is  to 
be  determined  by  the  cost  of  reproduction,  less  depre- 
ciation; and,  second,  the  right  to  use  them  in  a  certain 
business,  without  competition,  for  a  certain  time,  the 
value  of  which  right  is  to  be  determined  by  the  prob- 
able profit  of  such  use.  The  fact  that  the  plant  is  a 
running  plant,  and  the  probable  retention  of  custom- 
ers, which  is  what  is  meant  by  'good  will,'  are  elements 
which  are  included  in  the  valuation  of  the  franchise. 
A  monopoly  has  no  good  will,  for  its  customers  are 


541  REASONABLE    RATES.  §  473 

retained     by     compulsion,     not     by     their     voluntary 
choice." 


§  473.  Established  business  of  going  concern  with 
fixed  income. — That  the  value  of  the  plant  on  which 
a  return  may  be  properly  expected  is  enhanced  by  the 
fact  that  the  system  is  a  going  concern  in  actual  op- 
eration is  a  further  business  principle  to  which  the 
courts  have  given  full  effect  because  the  actual  value 
of  such  a  business  is  naturally  and  properly  enhanced 
by  the  fact  that  it  not  only  represents  a  fixed  property 
investment,  but  that  it  is  a  practical  operating  business 
furnishing  service  and  enjoying  the  income  received 
for  the  service.  As  the  court  in  the  case  of  Bruns- 
wick &  T.  Water  Dist.  v.  Maine  Water  Co.,  99  Maine 
371,  59  Atl.  537,  decided  in  1904,  so  well  expressed  it: 
"We  speak  sometimes  of  a  going  concern  value  as  if 
it  is  or  could  be  separate  and  distinct  from  structure 
value — so  much  for  structure  and  so  much  for  going 
concern.  But  this  is  not  an  accurate  statement.  The 
going  concern  part  of  it  has  no  existence  except  as  a 
characteristic  of  the  structure.  If  no  structure,  no 
going  concern.  If  a  structure  in  use,  it  is  a  structure 
whose  value  is  affected  by  the  fact  that  it  is  in  use. 
There  is  only  one  value.  It  is  the  value  of  the  struc- 
ture as  being  used.     That  is  all  there  is  of  it." 

§  474.  Reproduction  cost  ignores  going  concern 
value. — This  principle,  together  with  its  application, 
is  well  illustrated  by  the  decision  of  the  case  of  Na- 
tional Waterworks  Co.  v.  Kansas  City,  62  Fed.  853,  2^ 
L.  R.  A.  827,  decided  in  1894,  where  the  court  says: 
"The  original  cost  of  the  construction  can  not  control, 
for  'original  cost'  and  'present  value'  are  not  equiva- 
lent terms.  Nor  would  the  mere  cost  of  reproducing 
the  waterworks  plant  be  a  fair  test,  because  that  does 


§  474  PUBLIC    UTILITIES.  542 

not  take  into  account  the  value  which  flows  from  the 
established  connections  between  the  pipes  and  the 
buildings  of  the  city.  It  is  obvious  that  the  mere  cost 
of  purchasing  the  land,  constructing  the  buildings, 
putting  in  the  machinery,  and  laying  the  pipes  in  the 
streets — in  other  words,  the  cost  of  reproduction — 
does  not  give  the  value  of  the  property  as  it  is  today. 
A  completed  system  of  water-works,  such  as  the  com- 
pany has,  without  a  single  connection  between  the 
pipes  in  the  streets  and  the  buildings  of  the  city,  would 
be  a  property  of  much  less  value  than  that  system 
connected,  as  it  is,  with  so  many  buildings,  and  earn- 
ing, in  consequence  thereof,  the  money  which  it  does 
earn.  The  fact  that  it  is  a  system  in  operation,  not 
only  with  a  capacity  to  supply  the  city,  but  actually 
supplying  many  buildings  in  the  city — not  only  with 
a  capacity  to  earn,  but  actually  earning — makes  it 
true  that  'the  fair  and  equitable  value'  is  something 
in  excess  of  the  cost  of  reproduction." 

The  Supreme  Court  of  the  United  States  in  its 
decision  of  the  case  of  Omaha  v.  Omaha  Water  Co., 
218  U.  S.  180,  54  L.  ed.  991,  decided  in  1910,  ex- 
pressed the  principle  forcefully  and  convincingly  in 
saying  that:  "The  option  to  purchase  excluded  any 
value  on  account  of  unexpired  franchise;  but  it  did 
not  limit  the  value  to  the  bare  bones  of  the  plant,  its 
physical  properties,  such  as  its  lands,  its  machinery, 
its  water  pipes  or  settling  reservoirs,  nor  to  what  it 
would  take  to  reproduce  each  of  its  physical  features. 
The  value  in  equity  and  justice  must  include  whatever 
is  contributed  by  the  fact  of  the  connection  of  the 
items  making  a  complete  and  operating  plant.  The 
difference  between  a  dead  plant  and  a  live  one  is  a 
real  value,  and  is  independent  of  any  franchise  to  go 
on,  or  any  mere  good  will  as  between  such  a  plant 
and  its  customers." 


543  REASONABLE    RATES.  §  474 

That  this  principle  is  generally  recognized  is  ex- 
pressly indicated  by  the  decision  in  the  case  of  Pioneer 
Tel.  &  T.  Co.  V.  Westenhaver,  29  Okla,  429,  118  Pac. 
354.  38  L.  R.  A.  (N.  S.)  1209,  decided  in  191 1,  where 
the  court  says:  "There  is  no  contention  that  any 
value  on  account  of  unexpired  franchise  or  for  good 
will  should  be  added  to  the  reproductive  value,  in  or- 
der to  ascertain  the  present  value;  but  it  is  contended 
that,  by  reason  of  the  fact  that  appellant's  plant  has 
an  established  system  of  operation,  has  at  present 
customers  sufficient  in  number  to  pay  the  operating 
expenses  and  annual  depreciation  and  some  profit,  it 
has  a  value  beyond  the  mere  cost  of  reproducing  the 
plant.  This  element  of  value  contended  for  has  been 
generally  referred  to  by  the  authorities  as  'the  going 
concern  value'  or  'going  value.'  .  .  .  These  cases, 
so  far  as  we  have  been  able  to  examine  them,  uni- 
formly hold  that,  in  the  absence  of  a  provision  in  the 
franchise  to  the  contrary,  the  going  concern  element 
of  value  must  be  considered  in  ascertaining  the  fair 
value  of  the  plant." 


CHAPTER  XXIV. 

VALUATION    OF   THE   INVESTMENT. 

Section. 

475.  Basis  for  fixing  rates  and  purchase  price. 

476.  Fair  return  on  reasonable  value  of  necessary  property. 

477.  Four  theories  for  ascertaining  valuation. 

478.  Original   cost   if   not   excessive. 

479.  Reproduction  less  depreciation. 

480.  Capitalization   and    investment   distinguished. 

481.  Power  and  necessity  of  controlling  capitalization. 

482.  Connection    between    capitalization    and    necessary    investment 

not  always  apparent. 

483.  Tendency  to  regulate  issue  of  stocks  and  bonds. 

484.  Present  value  true  test. 

485.  Theories  of  valuation  considered. 

486.  Valuation  as  of  the  time  question  determined. 

487.  Present  value  as  a  going  concern. 

488.  Market  valuation  or  capitalization  inadequate. 

489.  Present  actual  physical  valuation  as  going  concern. 

490.  Franchise  valuation — Real  or  cost. 

491.  Valuation  limited  to  property  being  used  for  public. 

492.  Rate  presumed  reasonable — Effect  of  reduction  on  income. 

493.  Elements  of  valuation  as  evidence  of  true  value. 

494.  Current  market    price  and  rate  of  interest. 

495.  Net  earnings  rule. 

496.  Limitations  and  additions  necessary  to  this  rule. 

497.  No  constitutional  right  to  unreasonable  return. 

§  475.     Basis  for  fixing  rates  and  purchase  price. — 

The  determination  of  the  reasonable  value  of  its  prop- 
erty at  the  time  it  is  being  used  for  the  public,  upon 
which  the  municipal  public  utility  is  entitled  to  a  fair 
return,  is  the  ultimate  and  most  difficult  question. 
This  constitutes  the  basis  for  fixing  the  rates  which 
the  municipal  public  utility  may  receive  for  its  service 
and  is  the  amount  to  which  it  is  entitled  in  the  case 
of  its  purchase  by  the  municipal  corporation  in  the  ex- 
544 


545  VALUATION.  §  476 

ercise  of  its  right  of  eminent  domain  or  of  its  option 
or  contract  to  purchase  which  is  commonly  stipulated 
for  in  the  special  franchise  or  contract  granting  con- 
sent to  the  use  of  its  streets  for  the  purpose  of  instal- 
ing  and  operating  the  municipal  public  utility  and  pro- 
viding service  to  the  municipality  and  its  inhabitants. 

§  476.  Fair  return  on  reasonable  value  of  neces- 
sary property. — The  v^ell-established  rule  of  law  is 
unquestioned  that  "what  the  company  is  entitled  to 
demand,  in  order  that  it  may  have  just  compensation, 
is  a  fair  return  upon  the  reasonable  value  of  the  prop- 
erty at  the  time  it  is  being  used  for  the  public."^ 
The  determination  of  the  proper  basis  for  ascertaining 
the  reasonable  value  of  the  property  used  and  useful 
in  rendering  its  service  is  the  final  and  most  difficult 
matter  for  solution  in  the  complex  and  as  yet  not  fully 
developed  field  of  the  law  of  municipal  public  utilities. 

§  477.  Four  theories  for  ascertaining  valuation. — 
This  general  legal  principle  is  as  firmly  established 
and  fully  accepted  as  the  results  of  its  practical  appli- 
cation are  uncertain  and  difficult  of  solution  in  deter- 
mining what  specific  rate  should  be  fixed  in  the  par- 
ticular case.  In  addition  to  the  net  earnings  rule, 
there  are  four  different  theories  for  the  determination 
of  what  constitutes  a  reasonable  rate  under  the  facts  of 
any  particular  case.  These  theories  are  generally  de- 
fined by  terms  which  indicate  the  method  of  ascertain- 
ing what  would  be  a  fair  return  on  the  reasonable 
value  of  the  property,  and  are  thus  expressed — orig- 
inal cost;  cost  of  reproduction;  outstanding  capitaliza- 
tion, and  present  value.  Since  the  authorities  are  not 
agreed  as  to  the  proper  theory  for  determining  rates 
nor  as  to  the  manner  of  applying  the  legal  principle 

1  San  Diego  Land  &  Town  Co.  v.  National  City.  174  U.  S.  739. 
43  L.  ed.  1154. 
35— Pub.  Ui. 


§  47^  PUBLIC    UTILITIES.  546 

established  for  that  purpose,  it  is  impossible  that  they 
should  agree  on  what  constitutes  a  reasonable  rate  in 
any  case  or  that  a  decision  in  any  state  should  control 
in  other  states,  although  the  facts  of  the  case  may  be 
similar  or  even  identical  because  the  courts  are  not 
agreed  as  to  the  proper  theory  to  be  applied  for  the 
solution  of  the  question. 

§  478.  Original  cost  if  not  excessive. — The  appli- 
cation of  the  theory  of  original  cost  is  attended  with 
many  practical  difficulties,  for  in  attempting  to  ascer- 
tain the  actual  original  cost  in  many  cases  the  records 
available  on  this  point  are  neither  accurate  nor  com- 
plete. The  solution  of  the  further  question  under  this 
theory  of  original  cost,  which  is  naturally  attended 
with  difficulty,  is  the  determination  of  the  honesty  and 
necessity  of  such  expenditures  and  whether  the  con- 
tract price  as  paid  was  exorbitant  or  fraudulent,  for 
in  many  cases  the  contractor  has  been  paid  in  part  at 
least  in  stocks  and  bonds  of  the  municipal  public  utility 
on  a  valuation  which  was  far  from  par  and  probably 
no  nearer  their  actual  value  at  the  time  of  their  issue 
and  acceptance  by  the  contractor.  As  the  application 
of  this  theory  necessarily  requires  a  determination  of 
what  was  the  actual  and  fair  original  cost,  it  could 
not  be  followed  in  a  case  where  the  capacity  of  the 
plant  was  unreasonably  excessive  or  the  amount  which 
had  been  expended  in  its  equipment  or  for  a  site  was 
much  greater  than  necessary  to  provide  the  required 
service,  for  such  excess  could  not  be  fairly  included  in 
determining  the  proper  valuation  as  the  basis  for 
fixing  a  reasonable  rate  for  the  service,  although  in 
anticipation  of  increased  demands  for  its  service  the 
municipal  public  utility  is  entitled  to  provide  reason- 
able additional  capacity  over  the  actual  present  de- 
mands of  its  service  in  order  to  avoid  the  expense  of 


547  VALUATION.  §  479 

increasing  its  capacity  to  furnish  the  additional  service 
by  rebuilding  or  materially  extending  its  plant. 

§  479.  Reproduction  less  depreciation. — The  adop- 
tion of  the  theory  of  reproduction  is  attended  with 
practically  all  the  difficulties  of  that  of  original  cost, 
and  the  application  of  either  must  be  attended  with 
a  reduction  of  the  amount  of  the  depreciation  which 
the  plant  has  sustained,  except  so  far  as  its  parts  may 
have  been  repaired  or  replaced;  nor  does  the  theory 
of  the  original  cost  or  the  cost  of  reproduction  take 
into  account  a  valuation  of  the  plant  as  a  going  concern 
with  an  established  income. 

§  480.  Capitalization  and  investment  distinguished. 
— The  theory  of  outstanding  capitalization  is  not  sat- 
isfactory because  experience  has  shown  that  in  many 
cases  it  has  very  little,  if  any,  relation  to  the  actual 
value  of  the  investment.  Fortunately  for  the  con- 
sumer, the  courts  are  practically  agreed  that  the  out- 
standing capitalization  or  the  amount  of  stock  and 
bonds  issued  is  neither  a  fair  test  of  the  capital  actu- 
ally invested  in  the  business  nor  a  reliable  measure 
by  which  to  estimate  the  reasonable  value  of  the  prop- 
erty used  and  useful  in  rendering  the  service;  and 
many  cases  have  expressly  stated  that  there  is  little 
if  any  logical  connection  between  the  actual  value  of 
the  investment  and  the  par  or  even  market  value  of 
the  stock  and  bonds  issued  by  the  company,  which  the 
courts  have  said  only  constitutes  evidence  of  the  his- 
tory of  the  development  of  the  business  and  are  val- 
uable chiefly  for  that  purpose. 

§  481.  Power  and  necessity  of  controlling  capitali- 
zation.— The  state  which  creates  the  municipal  public 
utility  and  supervises  its  operation  directly  or  through 
its    agency,    the    municipality    or    commission,    unques- 


§  482  PUBLIC    UTILITIES.  548 

tionably  has  the  power  to  regulate  and  control  the 
issue  of  its  stock,  bonds  and  other  liabilities  upon 
which  a  fair  return  for  the  service  rendered  may  prop- 
erly be  expected.  This  matter  is  so  easy  of  control  in 
the  hands  of  the  state  that  its  flagrant  abuse  in  so 
many  cases  by  the  issue  of  almost  unlimited  quantities 
of  watered  stock  is  as  difficult  to  understand  as  it  is 
easy  to  correct  or  prevent.  That  the  state  has  this 
power  is  beyond  question,  and  while  some  of  the  courts 
may  seem  inclined  to  sustain  a  rate  which  will  permit 
of  a  return  on  such  stock  after  it  has  been  issued  and 
purchased  by  third  parties,  there  can  be  no  question 
as  to  the  opportunity  or  the  duty  of  the  state  to  pre- 
vent its  issue  in  the  first  instance  in  the  interest  and 
for  the  protection  of  the  public  which  pays  for  the 
service  as  well  as  purchases  the  securities. 

§  482.  Connection  between  capitalization  and  nec- 
essary investment  not  always  apparent. — It  is  the  rea- 
sonable value  of  the  property  which  is  being  used  for 
the  public  in  rendering  the  service  upon  which  the 
municipal  public  utility  is  entitled  to  a  fair  return  so 
that  the  capitalization  or  the  amount  of  stock  and 
bonds  outstanding  is  not  the  proper  basis  for  fixing 
the  rate,  for  frequently  it  is  not  even  a  fair  criterion 
of  the  actual  investment  necessary  to  render  the  serv- 
ice. Indeed,  so  great  has  become  the  discrepancy 
between  capitalization  and  actual  value  that  there 
seems  to  be  no  logical  connection  between  the  two; 
nor  does  a  rate  which  fails  to  give  a  reasonable  re- 
turn upon  all  the  outstanding  stock  and  bonds  of  the 
municipal  public  utility  so  far  as  such  capitalization 
exceeds  the  actual  value  of  the  investment  constitute 
a  taking  of  property  without  due  process,  nor  does  it 
amount  to  confiscation  because  it  is  the  real  and  not 
the     nominal    paper    valuation    that    determines    the 


549  VALUATION.  §  483 

amount  of  the  investment  upon  vvhich  the  municipal 
pubhc  utiHty  is  entitled  to  a  return.  The  purpose  and 
effect  of  an  inflated  capitalization  in  practice,  however, 
is  obvious  because  of  the  fact  that  it  often  receives 
full  recognition  in  fixing  the  rate,  and  so  long  as  this 
is  the  case  it  will  furnish  the  necessary  motive  for  the 
reorganization  of  municipal  public  utilities  and  their 
consolidation  as  well  as  for  the  organization  of  hold- 
ing companies,  and  such  legal  formalities  as  present 
practical  opportunity  for  increasing  the  apparent  in- 
vestment by  multiplying  and  supplementing  the  capi- 
talization as  evidenced  by  the  aggregate  amount  of 
stock  and  bond  issues  for  which  these  legal  formalities 
furnish  the  occasion. 

§  483.  Tendency  to  regulate  issue  of  stocks  and 
bonds. — There  is  an  increasing  tendency,  however,  to 
regulate  the  issue  of  stocks  and  bonds  and  a  few  of 
the  states  have  clearly  demonstrated  that  it  is  a  sim- 
ple matter  indeed  to  prevent  the  issue  of  more  stock 
or  the  creation  of  a  greater  bonded  indebtedness  than 
the  value  represented  by  it  and  received  for  it.  When 
capitalization  is  an  accurate  valuation  of  the  invest- 
ment of  a  municipal  public  utility,  the  matter  of  its 
regulation  is  greatly  simplified  and  the  determination 
of  the  proper  rate  for  the  service  rendered  is  greatly 
facilitated. 

§  484.  Present  value  true  test. — While  all  accurate 
available  evidence  of  the  original  cost,  as  well  as  the 
cost  of  reproduction  is  desirable  and  helpful  in  deter- 
mining the  extent  of  the  actual  investment  necessary 
to  render  the  service  in  any  particular  case,  neither 
these  nor  the  amount  of  capitalization  are  conclusive. 
The  present  market  value  of  the  plant  or  its  worth 
as  a  going  concern  is  the  ultimate  practical  basis  for 
determining  the   value   of   the   investment   upon   which 


§  484  PUBLIC    UTILITIES.  55O 

to  fix  a  rate  which  will  produce  a  fair  return.  The 
investment  is  the  actual  market  value  of  the  property 
which  is  being  used  for  the  public  and  is  useful  or 
necessary  at  the  time  to  render  the  service  which,  as 
a  going  concern,  includes  the  right  of  being  a  body 
corporate  as  well  as  the  special  privilege  of  using  the 
streets  and  other  public  places  of  the  municipality 
which  is  necessary  for  rendering  the  service;  and  as 
these  special  franchise  privileges  are  necessary  to  the 
operation  of  the  municipal  public  utility,  the  actual 
legitimate  expense  of  securing  them  is  a  proper  ele- 
ment of  the  investment,  although  on  the  other  hand, 
as  the  courts  have  observed,  where  this  privilege  is 
given  outright  by  the  municipality  it  is  difficult  for  the 
municipal  public  utility  to  justify  its  action  in  placing 
a  high  valuation  on  its  franchise  for  the  purpose  of 
determining  the  amount  of  the  investment  upon  which 
the  inhabitants  of  the  municipality,  who  have  already 
given  the  privilege,  should  be  required  to  pay  at  an 
increased  rate  for  the  service  which  it  receives. 

By  way  of  defining  the  well-estabHshed  rule  that 
"what  the  company  is  entitled  to  demand,  in  order 
that  it  may  have  just  compensation,  is  a  fair  return 
upon  the  reasonable  value  of  the  property  at  the  time 
it  is  being  used  for  the  public,"  and  of  determining  its 
practical  application  as  the  means  of  ascertaining  the 
proper  valuation  upon  which  to  fix  the  rate  for  the 
service  rendered,  the  following  cases  are  furnished  as 
the  basis  for  the  solution  of  the  question  so  far  as  it 
has  been  settled  by  our  courts.^ 

2  ARKANSAS.— Arkadelphia  Electric  Light  Co.  v.  Arkadelphia, 
99  Ark.  178,  137  S.  W.  1093. 

CALIFORNIA.— Contra  Costa  Water  Co.  v.  Oakland,  159  Cal.  323, 
113  Pac.  668;  Redlands,  L.  &  C.  Domestic  Water  Co.  v.  Redlands,  121 
Cal.  365,  53  Pac.  843;  San  Diego  Water  Co.  v.  San  Diego,  118  Cal.  556, 
50  Pac.  633,  38  L.  R.  A.  460,  62  Am.  St.  261. 

FEDERAL.— Boise  City  Irrig.  &  Land  Co.  v.  Clark,  131  Fed.  415; 
C.  H.  Venner  Co.  v.  Urbana  Waterworks,  174  Fed.  348;  Consolidated 


551  VALUATION.  §485 

§  485.  Theories  of  valuation  considered. — The  Su- 
preme Court  of  the  United  States  in  the  case  of  Knox- 
ville  V.  Knoxville  Water  Co.,  212  U.  S.  i,  53  L.  ed. 
371,  decided  in  1909,  after  observing  that  "regulation 
of  pubHc  service  corporations  which  perform  their 
duties    under    conditions    of    necessary    monopoly    will 

Gas  Co.  V.  New  York,  157  Fed.  849;  Cumberland  Tel.  &  T.  Co.  v. 
Louisville,  187  Fed.  637;  Cumberland  Tel.  &  T.  Co.  v.  Memphis,  183 
Fed.  875;  Cumberland  Tel.  &  T.  Co.  v.  Railroad  Commission,  156 
Fed.  823;  Des  Moines  Gas  Co.  v.  Des  Moines,  199  Fed.  204;  Des 
Moines  Water  Co.  v.  Des  Moines,  192  Fed.  193;  Milwaukee  Electric 
R.  &  Light  Co.  V.  Milwaukee,  87  Fed.  577;  National  Waterworks  Co. 
V.  Kansas  City,  62  Fed.  853,  27  L.  R.  A.  827;  Spring  Valley  Water 
Co.  V.  San  Francisco,  165  Fed.  667;  Spring  Valley  Waterworks  v.  San 
Francisco,  124  Fed.  574;  Spring  Valley  Waterworks  v.  San  Francisco, 
192  Fed.  137. 

IDAHO.— Pocatello  v.  Murray,  21  Idaho  180,  120  Pac.  812. 

ILLINOIS.— Chicago  Union  Traction  Co.  v.  Chicago,  199  111.  484, 
65  N.  E.  451.  59  L.  R.  A.  631. 

IOWA.— Cedar  Rapids  Gaslight  Co.  v.  Cedar  Rapids,  144  Iowa 
426,  120  N.  W.  966,  138  Am.  St.  299,  223  U.  S.  655,  56  L.  ed.  594;  Cedar 
Rapids  Water  Co.  v.  Cedar  Rapids,  118  Iowa  234,  91  N.  W.  1081,  199 
U.  S.  600,  50  L.  ed.  327. 

MASSACHUSETTS.— Falmouth  v.  Falmouth  Water  Co.,  180 
Mass.  325,  62  N.  E.  255;  Fall  River  Gas  Works  v.  Board  of  G.  &  E. 
L.  Comrs.   (Mass.),  102  N.  E.  475. 

MISSOURI.— Home  Tel.  Co.  v.  Carthage,  235  Mo.  644,  139  S.  W. 
547. 

NEW  JERSEY.— Long  Branch  Commission  v.  Tintern  Manor 
Water  Co.,  70  N.  J.  Eq.  71,  62  Atl.  474;  Public  Service  Gas  Co.  v. 
Board  of  Public  Utility  Commissioners   (N.  J.),  S7  Atl.  651. 

NEW  YORK.— People  ex  rel.  Jamaica  Water  Supply  Co.  v.  State 
Board  of  Tax  Comrs.,  196  N.  Y.  39,  89  N.  E.  581;  People  ex  rel.  Man- 
hattan R.  Co.  V.  Woodbury,  203  N.  Y.  231,  96  N.  E.  420;  People  ex 
rel.  Third  Ave.  R.  Co.  v.  State  Board  of  Tax  Comrs.,  19S  N.  Y.  608, 
120  N.  Y.  S.  528,  92  N.  E.  1098;  Silkman  v.  Board  of  Water  Comrs.  of 
Yonkers,  152  N.  Y.  327,  46  N.  E.  612,  37  L.  R.  A.  827,  71  Hun  (N.  Y.) 
37;  People  ex  rel.  Delaware  &  H.  Co.  v.  Stevens,  197  N.  Y.  1,  90 
N.  E.  60:  People  ex  rel.  Binghanipton,  &c.  Co.  v.  Stevens,  203 
N.  Y.  7,  96  N.  E.  114;  Hopper  v.  Willcox  (N.  Y.),  140  N.  Y.  S.  277; 
People  ex  rel.  King's  County  Lighting  Co.  v.  Willcox  (N.  Y.),  141 
N.  Y.  S.  677;  People  ex  rel.  Third  Ave.  Ry.  Co.  v.  Public  Service 
Commission,  203  N.  Y.  299,  96  N.  E.  1011;  People  ex  rel.  West- 
chester St.  Ry.  Co.  V.  Public  Service  Commission  (N.  Y.).  143  N. 
Y.  S.  148. 


§  485  PUBLIC    UTILITIES.  552 

occur  with  greater  and  greater  frequency  as  time  goes 
on,"  defined  this  rule  and  indicated  the  manner  of  its 
appHcation  as  follows:  "The  cost  of  reproduction  is 
one  way  of  ascertaining  the  present  value  of  a  plant 
like  that  of  a  water  company,  but  that  test  would  lead 
to  obviously  incorrect  results  if  the  cost  of  reproduc- 
tion is  not  diminished  by  the  depreciation  which  has 
come  from  age  and  use.  .  .  .  It  is  not  easy  to  fix 
at  any  given  time  the  amount  of  depreciation  of  a 
plant  whose  component  parts  are  of  different  ages, 
with  different  expectations  of  life.  But  it  is  clear  that 
some  substantial  allowance  for  depreciation  ought  to 
have  been  made  in  this  case.  .  .  .  Counsel  for  the 
company  urge  rather  faintly  that  the  capitalization  of 
the  company  ought  to  have  some  influence  in  the  case 
in  determining  the  valuation  of  the  property.  It  is  a 
sufificient  answer  to  this  contention  that  the  capitaliza- 
tion is  shown  to  be  considerably  in  excess  of  any  valu- 
ation testified  to  by  any  witness,  or  which  can  be 
arrived  at  by  any  process  of  reasoning,  .  .  .  Bonds 
and   preferred   and   common   stock   issued   under   such 

OKLAHOMA.— Pioneer  Tel.  &  T.  Co.  v.  Westenhaver,  29  Okla. 
429,  118  Pac.  354,  38  L.  R.  A.  (N.  S.)  1209. 

PENNSYLVANIA.— Brymer  v.  Butler  Water  Co.,  179  Pa.  231. 
36  Atl.  249,  36  L.  R.  A.  260;  Monongahela  Water  Co.,  In  re,  223  Pa. 
323,  72  Atl.  625. 

UNITED  STATES.— Knoxville  v.  Knoxville  Water  Co.,  212  U. 
S.  1,  53  L.  ed.  371;  Lincoln  Gas  &  E.  L.  Co.  v.  Lincoln,  223  U.  S.  349, 
56  L.  ed.  466;  Louisville  v.  Cumberland  Tel.  &  T.  Co.,  225  U.  S.  430, 
56  L.  ed.  1151;  San  Diego  Land  &  Town  Co.  v.  Jasper,  189  U.  S.  439, 
47  L.  ed.  892,  110  Fed.  702;  San  Diego  Land  &  Town  Co.  v.  National 
City,  174  U.  S.  739,  43  L.  ed.  1154;  Smyth  v.  Ames,  169  U.  S.  466,  42 
L.  ed.  819;  Stanislaus  County  v.  San  Joaquin  &  K.  R.  C.  &  I.  Co., 
192  U.  S.  201,  48  L.  ed.  406;  Willcox  v.  Consolidated  Gas  Co.,  212  U. 
S.  19,  53  L.  ed.  382;  Simpson  v.  Shepard,  229  U.  S.  — ,  33  Sup.  Ct. 
Rep.  729. 

WASHINGTON.— Puget  Sound  Electric  R.  Co.  v.  Railroad  Com- 
mission, 65  Wash.  75,  117  Pac.  739. 

WISCONSIN.— Appleton  Waterworks  Co.  v.  Railroad  Commis- 
sion (Wis.),  142  N.  W.  476. 


553  VALUATION.  §  486 

conditions  afford  neither  measure  of  nor  guide  to,  the 
value  of  the  property.  .  .  .  Before  coming  to  the 
question  of  profit  at  all  the  company  is  entitled  to 
earn  a  sufficient  sum  annually  to  provide  not  only  for 
current  repairs,  but  for  making  good  the  depreciation 
and  replacing  the  parts  of  the  property  when  they 
come  to  the  end  of  their  life.  The  company  is  not 
bound  to  see  its  property  gradually  v^aste,  without 
making  provision  out  of  earnings  for  its  replacement. 
It  is  entitled  to  see  that  from  earnings  the  value  of  the 
property  invested  is  kept  unimpaired,  so  that,  at  the 
end  of  any  given  term  of  years,  the  original  invest- 
ment remains  as  it  was  at  the  beginning." 

§  486.  Valuation  as  of  the  time  question  deter- 
mined.— The  same  court  in  the  case  of  Willcox  v. 
Consolidated  Gas  Co.,  212  U.  S.  19,  53  L.  ed.  382,  de- 
cided in  1909,  that  the  value  of  the  property  is  to  be 
determined  as  of  the  time  when  the  inquiry  is  made 
regarding  the  rates,  for  as  the  court  said:  "There 
must  be  a  fair  return  upon  the  reasonable  value  of  the 
property  at  the  time  it  is  being  used  for  the  public. 
.  .  .  But,  where  the  rate  complained  of  shows,  in 
any  event,  a  very  narrow  line  of  division  between  pos- 
sible confiscation  and  proper  regulation  ...  a 
court  of  equity  ought  not  to  interfere  by  injunction 
before  a  fair  trial  has  been  made  of  continuing  the 
business  under  that  rate,  and  thus  eliminating,  as  far 
as  is  possible,  the  doubt  arising  from  opinions  as  op- 
posed to  facts." 

§  487.  Present  value  as  a  going  concern. — The  case 
of  National  Waterworks  Co.  v.  Kansas  City,  62  Fed. 
853,  2^  L.  R.  A.  827,  decided  in  1894,  furnishes  an 
early  decision  to  the  effect  that  capitalization  of  the 
earnings,  the  original  cost  of  construction  or  the  cost 
of  reconstruction  are  neither  a  fair  nor  an  accu- 
rate test  of  the  valuation  of  the  investment,  for  as  the 


§  488  PUBLIC    UTILITIES.  554 

court  says :  "Capitalization  of  the  earnings  will  not, 
because  that  implies  a  continuance  of  earnings,  and  a 
continuance  of  earnings  rests  upon  a  franchise  to  op- 
erate the  water-works.  The  original  cost  of  the  con- 
struction can  not  control,  for  'original  cost'  and  'pres- 
ent value'  are  not  equivalent  terms.  Nor  would  the 
mere  cost  of  reproducing  the  water-works  plant  be  a 
fair  test,  because  that  does  not  take  into  account  the 
value  which  flows  from  the  established  connections 
between  the  pipes  and  the  buildings  of  the  city.  It 
is  obvious  that  the  mere  cost  of  purchasing  the  land, 
constructing  the  buildings,  putting  in  the  machinery, 
and  laying  the  pipes  in  the  streets — in  other  words, 
the  cost  of  reproduction — does  not  give  the  value  of 
the  property  as  it  is  today.  A  completed  system  of 
water-works,  such  as  the  company  has,  without  a 
single  connection  between  the  pipes  in  the  streets  and 
the  buildings  of  the  city,  would  be  a  property  of  much 
less  value  than  that  system  connected,  as  it  is,  with 
so  many  buildings,  and  earning,  in  consequence  there- 
of, the  money  which  it  does  earn.  The  fact  that  it  is 
a  system  in  operation,  not  only  with  a  capacity  to 
supply  the  city,  but  actually  supplying  many  buildings 
in  the  city — not  only  with  a  capacity  to  earn,  but 
actually  earning — makes  it  true  that  'the  fair  and 
equitable  value'  is  something  in  excess  of  the  cost  of 
reproduction." 

§  488.  Market  valuation  or  capitalization  inade- 
quate.— That  neither  the  capitalization  nor  the  stock 
market  valuation  which  fluctuates  and  is  directly  affect- 
ed by  rate  regulation  are  proper  measures  of  the  actual 
valuation  of  the  investment  is  indicated  by  the  court  in 
the  case  of  Spring  Valley  Waterworks  v.  San  Fran- 
cisco, 124  Fed.  574,  decided  in  1903,  as  follows:  "It 
is  probably  true  that  only  a  small  part  of  the  capital 


555  VALUATION.  §  489 

Stock  could  be  bought  at  this  price.  It  is  also  true 
that  the  stock  market  is  not  always  a  safe  guide  to 
values.  It  may  be  influenced  by  considerations  that 
do  not  affect  the  real  value  of  the  property,  and  in  the 
present  case  it  is  alleged  in  the  bill  of  complaint  that 
the  action  of  the  board  of  supervisors  in  passing  ordi- 
nances reducing  water  rates  has  caused  the  reduction 
in   the   value  of   the   stock." 

One  of  the  most  recent  and  comprehensive  deci- 
sions on  this  point  is  found  in  the  case  of  Des  Moines 
Gas  Co.  V.  Des  Moines,  199  Fed.  204,  decided  Aug. 
21,  1912,  where  the  court  says:  "The  'good  will'  and 
that  which  the  corporation  enjoys  as  being  the  only 
source  from  which  gas  can  be  obtained  is  not  an  ele- 
ment of  value  on  which  profits  should  be  earned  in 
estimating  whether  the  rates  are  remunerative  or  con- 
fiscatory. Willcox  V.  Consolidated  Gas  Co.,  212  U.  S. 
19,  53  L.  ed.  382.  All  concede  that  the  present  value 
is    the   basis   on    which    returns    are    to   be   estimated." 

§  489.  Present  actual  physical  valuation  as  going 
concern. — The  recent  case  of  Des  Moines  Water  Co. 
V.  Des  Moines,  192  Fed.  193,  decided  in  191 1,  furnishes 
a  practical  decision  of  this  point  where  the  court  says: 
"What  is  the  value  of  the  plant  today?  There  must 
be  a  reasonable  rate  of  interest  or  dividends  allowed 
on  the  value  of  the  plant.  If  a  concern  is  not  profit- 
able, the  investors  must  lose  their  money.  If  the 
plant  is  a  profitable  one,  then  such  profits  can  not  ex- 
ceed a  reasonable  rate  of  interest  or  dividend.  .  .  . 
There  can  be  no  true  test,  other  than  the  physical 
valuation,  and  to  such  physical  valuation  there  may 
be  added  certain  other  items." 

That  the  true  valuation  is  the  actual  present  value 
of  the  investment  of  the  municipal  public  utility  as  a 
going  concern  is  the  effect  of  the  decision  in  the  case 


§  490  PUBLIC    UTILITIES.  556 

of  Cedar  Rapids  Gaslight  Co.  v.  Cedar  Rapids,  144 
Iowa,  426,  120  N.  W.  966,  138  Am.  St.  R.  299,  223 
U.  S.  655,  56  L.  ed.  594,  decided  in  1909,  for  as  the 
court  says:  "As  said,  the  value  of  the  system  as 
completed,  earning  a  present  income,  is  the  criterion. 
In  so  far  as  influenced  by  income,  however,  the  com- 
putation necessarily  must  be  made  on  the  basis  of 
reasonable  charges,  for  whatever  is  exacted  for  a  pub- 
lic service  in  excess  of  this  is  to  be  regarded  as  un- 
lawful. Save  as  above  indicated,  the  element  of  value 
designated  a  'going  concern'  is  but  another  name  for 
'good  will,'  which  is  not  to  be  taken  into  account  in 
a  case  like  this,  where  the  company  is  granted  a 
monopoly.  Cedar  Rapids  Water  Company  v.  City  of 
Cedar  Rapids,  118  Iowa  234,  91  N.  W.  1081,  199  U. 
S.  600,  50  L.  ed.  327;  Willcox  v.  Consolidated  Gas  Co., 
212  U.  S.  19,  53  L.  ed.  382.  ...  In  ascertaining 
values  in  this  way,  the  worth  of  a  new  plant  of  equal 
capacity,  efBciency,  and  durability,  with  proper  dis- 
counts for  defects  in  the  old  and  depreciation  for  use, 
should  be  the  measure  of  value  rather  than  the  cost 
of  exact  duplication." 

§  490.  Franchise  valuation — Real  or  cost. — ^That 
the  franchise  and  special  privileges  necessary  to  own 
and  operate  the  municipal  public  utility  are  properly 
included  in  the  true  valuation  of  its  actual  investment 
which  is  the  basis  for  fixing  the  rates  to  be  charged 
for  the  service  rendered  is  well  expressed  in  the  case 
of  Spring  Valley  Waterworks  Co.  v.  San  Francisco, 
165  Fed.  667,  decided  in  1908,  where  the  court  says: 
^'He  is  entitled  to  a  fair  return,  not  always  upon  the 
cost  of  the  property,  because  it  may  have  cost  too 
much ;  not  always  upon  the  outstanding  indebtedness, 
because  it  may  be  in  excess  of  the  real  value  of  the 
property;  not  always  upon  the  total  amount  invested, 


557  VALUATION.  §  491 

because  some  portion  of  that  which  is  acquired  by  the 
investment  may  be  neither  necessary  nor  presently 
useful  for  the  public  service;  but  upon  the  fair  present 
value  of  that  which  is  used  for  the  public  benefit,  hav- 
ing due  regard  always  to  the  reasonable  value  of  the 
service  rendered.  .  .  .  The  idea  that  a  valuable 
franchise  could  be  taken  in  condemnation  proceedings, 
without  compensation,  would  not  be  tolerated  for  an 
instant;  and  to  permit  such  a  franchise  to  be  taken 
without  consideration,  indirectly,  by  means  of  rate 
regulation,  is  equally  obnoxious  to  the  federal  consti- 
tution. ...  It  would  seem  from  this  that  Spring 
Valley  revenues  have  never  been  adequate  to  yield 
anything  in  excess  of  a  fair  return  upon  the  capital 
actually  put  into  the  plant.  There  has  been  no  in- 
come which  might  be  credited  as  earnings  to  the  fran- 
chise in  addition  to  and  above  what  is  apparently  a 
scant  reward  for  actual  capital  invested.  The  condi- 
tions thus  disclosed  do  not  necessarily  predicate  un- 
fair action  by  the  board  of  supervisors.  It  may  be 
that  the  water  company  itself  has  been  extravagant, 
or  that  its  investments  have  been  larger  than  the  needs 
of   San    Francisco   demanded." 

§491.  Valuation  limited  to  property  being  used 
for  public. — By  way  of  determining  the  proper  rate  on 
the  "value  of  the  property  actually  used  and  useful" 
in  furnishing  the  service  the  court  in  the  case  of  San 
Diego  Land  &  Town  Co.  v.  Jasper,  189  U.  S.  439, 
no  Fed.  702,  47  L.  ed.  892,  decided  in  1903,  said: 
"It  no  longer  is  open  to  dispute  that  under  the  con- 
stitution 'what  the  company  is  entitled  to  demand,  in 
order  that  it  may  have  just  compensation,  is  a  fair 
return  upon  the  reasonable  value  of  the  property  at 
the  time  it  is  being  used  for  the  public'  San  Diego 
Land   &  Town   Co.   v.   National   City,    174  U.   S.   739, 


§  492  PUBLIC    UTILITIES.  558 

43  L.  ed.  1 154.  That  is  decided,  and  is  decided  as 
against  the  contention  that  you  are  to  take  the  actual 
cost  of  the  plant,  annual  depreciation,  etc.,  and  to 
allow  a  fair  profit  on  that  footing  over  and  above  ex- 
penses. We  see  no  reason  to  doubt  that  the  California 
statute  means  the  same  thing." 

§  492.  Rate  presumed  reasonable — Effect  of  re- 
duction on  income. — After  observing  that  the  court 
will  always  presume  in  favor  of  the  sufficiency  of  the 
rate  as  prescribed  to  produce  a  fair  return  upon  the 
value  of  the  property  necessary  to  furnish  the  service, 
the  court  in  the  case  of  Lincoln  Gas  &  E.  L.  Co.  v. 
Lincoln,  223  U.  S.  349,  56  L.  ed.  466,  decided  Feb- 
ruary 19,  1912,  by  way  of  a  summary  of  the  practical 
rules  for  determining  the  proper  rate  observed  that: 
"In  this,  as  in  every  other  legislative  rate  case,  there 
are  presented  three  questions  of  prime  importance: 
First,  the  present  reasonable  value  of  the  company's 
plant  engaged  in  the  regulated  business;  second,  what 
will  be  the  probable  effect  of  the  reduced  rate  upon 
the  future  net  income  from  the  property  engaged  in 
serving  the  public;  and,  third,  in  ascertaining  the  prob- 
able net  income  under  the  reduced  rates  prescribed, 
what  deduction,  if  any,  should  be  made  from  the  gross 
receipts  as  a  fund  to  preserve  the  property  from  future 
depreciation." 

§  493.  Elements  of  valuation  as  evidence  of  true 
value. — The  leading  case  on  this  question  of  deter- 
mining the  proper  rate  is  that  of  Smyth  v.  Ames,  169 
U.  S.  466,  42  L.  ed.  819,  decided  in  1898,  where  the 
court  after  recognizing  the  difficulty  of  the  question 
expressed  the  rule  by  saying:  "We  hold,  however, 
that  the  basis  of  all  calculations  as  to  the  reasonable- 
ness of  rates  to  be  charged  by  a  corporation  main- 
taining a  highway  under  legislative  sanction  must  be 


559  VALUATION.  §  494 

the  fair  value  of  the  property  being  used  by  it  for  the 
convenience  of  the  pubHc.  And,  in  order  to  ascertain 
that  value,  the  original  cost  of  construction,  the  amount 
expended  in  permanent  improvements,  the  amount  and 
market  value  of  its  bonds  and  stock,  the  present,  as 
compared  with  the  original  cost  of  construction,  the 
probable  earning  capacity  of  the  property  under  par- 
ticular rates  prescribed  by  statute,  and  the  sum  re- 
quired to  meet  operating  expenses,  are  all  matters 
for  consideration,  and  are  to  be  given  such  wreight  as 
may  be  just  and  right  in  each  case.  We  do  not  say 
that  there  may  not  be  other  matters  to  be  regarded 
in  estimating  the  value  of  the  property.  What  the 
company  is  entitled  to  ask  is  a  fair  return  upon  the 
value  of  that  which  it  employs  for  the  public  con- 
venience. On  the  other  hand,  what  the  public  is  en- 
titled to  demand  is  that  no  more  be  exacted  from  it 
for  the  use  of  a  public  highway  than  the  services  ren- 
dered by  it  are  reasonably  worth." 

§  494.     Current  market  price  and  rate  of  interest. 

— That  the  valuation  should  be  made  contemporaneous 
with  the  fixing  of  the  rate  and  that  the  proper  test  in 
determining  the  value  is  the  market  price  of  the  prop- 
erty upon  which  the  current  rate  of  interest  is  com- 
monly regarded  as  a  fair  return  and  a  proper  basis 
for  fixing  the  rate  is  the  effect  of  the  decision  in  the 
case  of  Consolidated  Gas  Co.  v.  New  York,  157  Fed. 
849,  decided  in  1907,  where  the  court  said:  "As  to  the 
realty,  the  values  assigned  are  those  of  the  time  of 
inquiry;  not  cost  when  the  land  was  acquired  for  the 
purposes  of  manufacture,  and  not  the  cost  to  the 
complainant  of  so  much  as  it  acquired  when  organ- 
ized in  1884,  as  a  consolidation  of  several  other  gas 
manufacturing  corporations.  What  the  court 

should  ascertain  is  the  'fair  value  of  the  property  be- 


§  494  PUBLIC    UTILITIES.  560 

ing  used'  (Smyth  v.  Ames,  169  U.  S.  at  page  546) ; 
the  'present'  as  compared  with  'original'  cost;  what 
complainant  'employs  for  the  public  convenience'  (169 
U.  S.  at  page  547) ;  and  it  is  also  the  'value  of  the 
property  at  the  time  it  is  being  used'  (San  Diego 
Land  Co.  v.  National  City,  174  U.  S.  at  page  757). 
.  ,  .  The  value  of  the  investment  of  any  manufac- 
turer in  plant,  factory,  or  goods,  or  all  three,  is  what 
his  possessions  would  sell  for  upon  a  fair  transfer 
from  a  willing  vendor  to  a  willing  buyer,  and  it  can 
make  no  difference  that  such  value  is  affected  by  the 
efforts  of  himself  or  others,  by  whim  or  fashion,  or 
(what  is  really  the  same  thing)  by  the  advance  of 
land  values  in  the  opinion  of  the  buying  public.  .  .  . 
Indeed,  the  causes  of  either  appreciation  or  deprecia- 
tion are  alike  unimportant,  if  the  fact  of  value  be  con- 
ceded or  proved;  but  that  ultimate  inquiry  is  often- 
times so  difficult  that  original  cost  and  reasons  for 
changes  in  value  become  legitimate  subjects  of  inves- 
tigation, as  checks  upon  expert  estimates  or  book- 
keeping inaccurate  and  perhaps  intentionally  mislead- 
ing." 

A  further  definition  of  the  rule  by  which  to  deter- 
mine the  proper  rate  for  municipal  public  utility  serv- 
ice is  furnished  by  the  leading  case  of  Brymer  v. 
Butler  Water  Co.,  179  Pa.  231,  36  Atl.  249,  36  L.  R. 
A.  260,  decided  in  1897,  as  follows :  "Ordinarily,  that 
is  a  reasonable  charge  or  system  of  charges  which 
yields  a  fair  return  upon  the  investment.  Fixed 
charges  and  the  costs  of  maintenance  and  operation 
must  first  be  provided  for.  Then  the  interests  of  the 
owners  of  the  property  are  to  be  considered.  They 
are  entitled  to  a  rate  of  return,  if  their  property  will 
earn  it,  not  less  than  the  legal  rate  of  interest;  and  a 
system  of  charges  that  yields  no  more  income  than  is 
fairly  required  to  maintain  the  plant,  pay  fixed  charges 
and    operating    expenses,    provide    a    suitable    sinking 


561  VALUATION.  §  495 

fund  for  the  payment  of  debts,  and  pay  a  fair  profit 
to  the  owners  of  the  property,  can  not  be  said  to  be 
unreasonable." 

§  495.  Net  earnings  rule. — The  definition  and  the 
practical  application  of  the  so-called  net  earnings  rule 
is  furnished  by  a  series  of  decisions  of  the  Supreme 
Court  of  New  York  in  connection  with  the  subject  of 
the  taxation  of  the  franchise  of  the  municipal  public 
utility.  A  brief  summary  of  this  rule  is  furnished  in 
the  case  of  People  ex  rel.  Manhattan  R.  Co.  v.  Wood- 
bury, 203  N.  Y.  231,  96  N.  E.  420,  decided  in  191 1,  as 
follows:  "The  rule,  in  brief,  is  to  ascertain  the  gross 
earnings  of  the  corporation,  and  then  deduct  the  op- 
erating expenses,  together  with  the  annual  taxes  paid. 
From  the  remainder,  there  should  also  be  deducted  a 
fair  and  reasonable  return  on  that  portion  of  the  cap- 
ital of  the  corporation  which  is  invested  in  tangible 
property,  the  result  becoming  the  net  earnings  con- 
tributable  to  the  special  franchise,  which,  when  cap- 
italized at  a  rate  which  I  shall  hereafter  consider, 
becomes  the  value  of  the  intangible  property  of  the 
special   franchise." 

§  496.  Limitations  and  additions  necessary  to  this 
rule. — A  good  definition,  as  well  as  a  necessary  limi- 
tation on  the  practical  application  of  this  rule,  is  fur- 
nished by  the  court  in  the  case  of  People  ex  rel. 
Jamaica  Water  Supply  Co.  v.  State  Board  of  Tax 
Comrs.,  196  N.  Y.  39,  89  N.  E.  581,  decided  in  1909, 
as  follows:  "The  net  earnings  rule  contemplates  a 
valuation  upon  the  basis  of  the  net  earnings  of  the 
corporation  which  are  attributable  to  its  enjoyment  of 
the  special  franchise.  The  method  is  thus  applied:  (i) 
Ascertain  the  gross  earnings.  (2)  Deduct  the  operat- 
ing expenses.      (3)    Deduct   a  fair  and   reasonable   re- 

36— Pub.  ut 


§  497  PUBLIC  UTILITIES.  562 

turn  on  that  portion  of  the  capital  of  the  corporation 
which  is  invested  in  tangible  property.  The  resulting 
balance  gives  the  earnings  attributable  to  the  special 
franchise.  If  this  balance  be  capitalized  at  a  fair  rate, 
we  have  the  value  of  the  special  franchise. 
No  corporation  would  be  regarded  as  well  conducted 
which  did  not  make  some  provision  for  the  necessity 
of  ultimately  replacing  the  property  thus  suffering 
deterioration;  and  we  can  not  see  why  an  allowance 
for  this  purpose  should  not  be  made  out  of  the  gross 
earnings  in  order  to  ascertain  the  true  earning  capac- 
ity. .  .  .  While  evidence  as  to  what  constitutes  a 
fair  and  reasonable  rate  of  return  in  the  business  of 
a  corporation  was  received  in  this  Consolidated  Gas 
Co.  case,  157  Fed.  849,  869,  and  may  properly  be  taken 
by  the  court  in  certiorari  proceedings  under  the  tax 
law  if  parties  see  fit  to  offer  it,  the  court  may,  in  the 
absence  of  such  evidence,  adopt  six  per  cent,  as  a  fair 
rate  for  the  purpose  of  calculating  the  value  of  a  spe- 
cial franchise  under  the  net  earnings  rule.  In  valuing 
the  tangible  property  of  the  relator,  the  land  occupied 
by  a  portion  of  the  plant  was  an  important  element 
to  be  considered.  The  referee  allowed  a  return  only 
upon  the  original  cost  of  such  land  ($25,162.01),  in- 
stead of  upon  its  present  value    ($71,018.28)." 

§  497.  No  constitutional  right  to  unreasonable  re- 
turn.— The  court  in  the  case  of  City  of  Pocatello  v. 
Murray,  21  Idaho  180,  120  Pac.  812,  decided  January 
18,  1912,  expressed  the  constitutional  principle  in- 
volved in  the  question  of  rate  regulation  by  saying: 
"He  has  no  vested  right  to  charge  an  unreasonable  or 
an  unconscionable  rate  while  exercising  a  franchise  to 
serve  a  public  use.  To  deprive  a  person  engaged  in 
such  a  public  service  of  the  power  to  charge  and  col- 
lect  an   unreasonable,   extortionate,    or   unconscionable 


563  VALUATION.  §  497 

rate  deprives  him  of  no  right,  natural  or  acquired,  and 
can  not  be  the  impairment  of  a  contract  within  the 
purview  and  meaning  of  section  10,  art.  i,  of  the 
federal  constitution,  nor  is  it  depriving  him  of  property 
without  due  process  of  law,  in  violation  of  the  four- 
teenth amendment." 

A  further  accurate  expression  of  the  constitutional 
phase  of  the  question  is  furnished  in  the  case  of  Chi- 
cago Union  Traction  Co.  v.  Chicago,  199  111.  484,  65 
N.  E.  451,  59  L.  R.  A.  631,  decided  in  1902,  where  the 
court  says:  "It  is  only  where  rates  are  made  so  un- 
reasonable as  to  make  the  enforcement  of  the  law 
establishing  them  equivalent  to  taking  property  for 
public  use  without  just  compensation  that  the  federal 
courts  hold  that  the  corporation  has  been  deprived  of 
its  property  without  due  process  of  law,  and  has  been 
denied  the  equal  protection  of  the  laws." 


CHAPTER  XXV. 

REGULATION  BY  MUNICIPAL  CORPORA- 
TIONS, 

Section. 

498.  Governmental  power  to  regulate  rates  suspended  by  contract. 

499.  Municipal  control  practical  and  power  delegated  adequate. 

500.  Tendency   to  increase  municipal   control   of  real  party  in  in- 

terest. 

501.  Persistent  vigorous   enforcement   of   franchise   essential. 

502.  Strict  construction  of  contracts  suspending  power  to  regulate. 

503.  Power  to  regulate  and  to  fix  rates  by  contract  distinguished. 

504.  Power  to  fix  rates  must  be  exercised  in  manner  provided. 

505.  Power  to  regulate  rates  to  be  conserved. 

506.  Rate  regulation  and  the  general  welfare. 

507.  Power  to  fix  rates  may  be  delegated  to  municipality. 

508.  Policy  of  local  control  over  purely  local  matters. 

509.  Municipal  authorities  competent  to  fix  rates  for  action  official. 

510.  Duty  of  municipality  to  prevent  excessive  rates. 

511.  Rate   subject  to   change   by   state   if  made   without   authority. 

512.  Delegated  power  to  fix  rate  binding  until  revoked. 

513.  Statutory  construction  of  power  to  regulate  and  fix  rates. 

514.  Power  to  regulate  rates  not  surrendered  by  implication. 

515.  Rates  fixed  by  contracts  not  clearly  authorized  held  declara- 

tory only. 

516.  Strict  construction  saves  right  to  regulate  if  rate  not  expressly 

covered. 

517.  Right   to    regulate   under   reserved    right   to    alter,    amend    or 

repeal. 

518.  Regulation  continuing  and  akin  to  police  power. 

519.  Liberal  construction  finds  contract  binding  on  rates. 

520.  Delegated  power  to  fix  rates  by  contract  or  franchise  limited 

thereby. 

521.  Contract  giving  consent  and  fixing  rates  valid. 

522.  Fixing  maximum  rates  permits  regulation  as  to  reasonableness. 

523.  Fixing  rates  not  favored— Tends  to  create  monopoly. 

§  498.     Governmental  power  to  regulate  rates  sus- 
pended by  contract. — The   power   to   control  the  mu- 
564 


565  MUNICIPAL   REGULATION.  §  499 

nicipal  public  utility,  to  regulate  its  service  and  to  fix 
the  rate  therefor  is  essentially  a  power  of  government, 
the  importance  of  which  is  becoming  more  generally 
recognized,  is  legislative  or  administrative  in  its  char- 
acter, continuing  in  its  nature  and  capable  of  being 
delegated  to  the  municipality.  When  acting  under 
such  delegated  authority  the  municipality  has  the 
power  to  fix  the  rate  which  may  be  charged  for  the 
service  rendered  by  any  municipal  public  utility  by 
contract  for  a  definite  period  of  time  which  is  not  so 
unreasonable  in  its  extent  nor  as  to  its  terms  and  con- 
ditions as  to  constitute  a  clear  abuse  of  such  delegated 
authority  amounting  to  fraud.  The  efifect  of  such  a 
contract  made  in  the  exercise  of  duly  authorized 
power  is  to  suspend  the  exercise  by  the  government 
of  the  power  to  fix  and  regulate  rates;  and  because 
of  this  effect  the  authority  and  the  intention  to  make 
such  a  contract  must  be  clearly  apparent  in  order  to 
preclude  the  state  from  regulating  the  rates. 

§  499.  Municipal  control  practical  and  power  dele- 
gated adequate. — Because  of  the  great  variety  and 
varying  conditions  under  which  different  municipalities 
provide  for  municipal  public  utility  service  a  general 
statute  of  the  state  attempting  to  regulate  the  service 
and  fix  the  rate  at  which  it  should  be  furnished  could 
hardly  be  drawn  which  would  be  fairly  and  satisfac- 
torily adaptable  to  the  conditions  of  all  municipal  cor- 
porations in  the  state.  As  a  matter  of  convenience  and 
practical  necessity  the  exercise  of  this  power  to  fix 
rates  and  to  permit  of  their  modification  to  meet 
changing  conditions  with  greater  flexibility  and  with 
more  specific  reference  to  the  conditions  peculiar  to 
any  particular  municipality  has  often  been  delegated 
by  the  states  by  express  statutory  enactment  to  the 
municipal  corporations  themselves.     Acting  under  such 


§  500  PUBLIC   UTILITIES.  566 

delegated  authority  or  that  conferred  upon  the  mu- 
nicipaHty  to  give  its  consent  to  the  maintenance  and 
operation  of  the  municipal  pubHc  utiHty  as  the  special 
franchise  privilege  permitting  the  furnishing  of  service 
upon  such  terms  and  conditions  as  the  municipality 
sees  fit  to  impose,  the  municipal  corporation  has  the 
power  of  regulating  the  service  and  fixing  the  rates 
to  be  charged  by  any  particular  municipal  public  util- 
ity. Where  the  municipality  has  the  right  to  grant 
the  necessary  franchise  to  the  municipal  public  utility 
permitting  it  to  furnish  its  service,  it  may  also  protect 
itself  and  its  inhabitants  from  unreasonable  charges 
or  inadequate  service,  and  the  very  important  duty 
devolves  upon  the  municipal  authorities  in  granting 
the  special  franchise  privilege  to  the  municipal  public 
utility  of  exercising  this  pow^er  vested  in  the  munici- 
pality and  of  safeguarding  and  protecting  the  public 
interest  and  that  of  the  individual  customer. 

§  500.  Tendency  to  increase  municipal  control  o£ 
real  party  in  interest. — The  power  to  regulate  the 
service  of  municipal  public  utilities  and  to  fix  its  rates 
is  being  confej-red  upon  municipalities  with  greater 
frequency  not  only  for  the  reason  that  this  permits  of 
its  more  convenient  exercise,  but  because  of  the  more 
extensive  acceptance  of  the  doctrine  of  the  right  of 
the  municipality  to  exercise  home  rule  in  strictly  local 
matters.  Being  of  peculiar  interest  to  the  municipality 
affected,  this  plan  naturally  secures  the  necessary  at- 
tention to  insure  proper  regulation  and  control.  The 
necessity  for  regulation  due  to  the  fact  that  the  busi- 
ness is  both  a  public  one  and  a  natural  monopoly  is 
as  imperative  as  the  recognition  of  the  right  to  regu- 
late, for  no  matter  how  completely  the  principles  of 
regulation  may  be  established  and  the  rules  for  arriv- 
ing at  the   proper  rate   determined,   unless   the   power 


567  MUNICIPAL    REGULATION.  §  5OI 

to  apply  these  principles  of  regulation  and  exercise  the 
rules  for  ascertaining  and  imposing  the  proper  rate  is 
conferred  upon  an  efficient  responsible  body  that  will 
conscientiously  at  all  times  attend  to  their  proper 
enforcement,  the  attention  necessary  to  secure  ade- 
quate service  at  reasonable  rates  will  fail  of  realization 
in  practice. 

§  501.  Persistent  vigorous  enforcement  of  franchise 
essential. — The  strict  enforcement  of  the  franchise 
rights  and  the  uncompromising  application  of  the  prin- 
ciples defining  what  constitutes  adequate  service  and 
reasonable  rates  are  as  essential  as  that  the  proper 
franchise  be  drawn  and  the  correct  principles  of  regu- 
lation be  established.  The  strict  persistent  enforce- 
ment of  the  franchise  rights  and  the  accepted  princi- 
ples for  the  regulation  of  the  service  are  among  the 
most  important  duties  devolving  upon  the  municipal 
authorities,  for  the  municipality,  as  well  as  for  the 
municipal  public  utility  itself,  because  both  the  con- 
sumer and  the  producer  are  interested  in  and  directly 
affected  by  the  proper  determination  of  what  consti- 
tutes adequate  service  and  reasonable  rates  as  well  as 
in  the  proper  enforcement  of  these  rights. 

§  502.  Strict  construction  of  contracts  suspending 
power  to  regulate. — In  the  interest  of  the  public,  the 
statutory  grants  to  municipalities  of  the  right  to  make 
long-time  contracts  for  public  utility  service  binding 
on  the  public  and  to  fix  the  rate  to  be  charged  for 
the  service  are  not  favored  because  they  tend  to  sus- 
pend the  right  to  regulate  the  service  and  to  modify 
the  rates  as  changing  conditions  permit  or  justify, 
which,  but  for  the  existence  of  such  a  contract,  is 
always  available,  so  that  such  statutory  grants  as 
well  as  the  contracts  made  pursuant  to  their  provisions 


§  503  PUBLIC   UTILITIES.  568 

are  strictly  construed.  And  only  in  those  cases  where 
the  right  absolutely  to  fix  rates  is  conferred  upon  the 
municipality  will  the  state  be  held  to  have  relinquished 
its  power  to  enact  further  laws  and  continue  to  regu- 
late the  rates  so  that  where  no  sufficient  authority 
has  been  given  to  the  municipality  to  make  such  a 
contract  and  thus  to  suspend  the  right  to  adjust  rates 
for  the  period  fixed  by  its  terms,  the  right  of  the  state 
to  interfere  for  the  purpose  of  regulating  the  service 
and  modifying  the  rates  in  the  interest  of  the  public 
is  not  abrogated.  In  such  cases  the  contract  of  the 
municipality  for  the  service  of  municipal  public  utilities 
is  made  and  held  subject  to  the  right  of  the  state  to 
exercise  its  paramount  authority  by  virtue  of  its 
governmental  power  to  fix  rates.  Where  this  power 
has  not  been  surrendered  by  the  state  it  is  in  effect 
only  suspended  by  the  making  of  such  a  contract  by 
the  municipality  until  action  is  taken  by  the  state,  just 
as  state  legislation  is  superseded  by  congressional  reg- 
ulation of  interstate  commerce  or  of  any  matter  over 
which  the  federal  government  also  has  jurisdiction. 

§  503.  Power  to  regulate  and  to  fix  rates  by  con- 
tract distinguished. — As  the  legislature  has  the  power 
to  delegate  authority  to  the  municipality  to  regulate 
service  and  to  fix  rates,  it  also  has  the  power  to  revoke 
such  authority  and  to  regulate  directly  or  through 
another  agency  or  commission,  and  only  in  those  cases 
where  the  authority  delegated  to  the  municipality 
clearly  confers  upon  it  the  power  to  agree  upon  a  fixed 
rate  for  a  definite  period  which  the  municipality  clearly 
does  by  contract,  is  the  state  precluded  at  any  time 
from  regulating  the  service  and  readjusting  the  rates. 
On  the  other  hand  where  the  state  has  clearly  author- 
ized the  municipality  to  contract  for  the  service  of 
municipal  public  utilities  and  to  fix  the  rate  for  a 
definite  period,  the  contract  of  the  municipality  made 


569  MUNICIPAL    REGULATION.  §  504 

pursuant  to  such  authority  can  not  be  set  aside  by 
the  state.  The  authority  to  regulate  the  service  and 
the  rate  to  be  charged  for  it  when  conferred  upon  the 
municipahty  enables  it  to  exercise  the  governmental 
pov^er  of  regulating  charges  as  well  as  the  service, 
but  does  not  authorize  it  to  enter  into  a  contract  to 
abandon  the  governmental  power  itself.  The  authority 
to  exercise  the  governmental  power  of  regulation  and 
to  determine  from  time  to  time  what  constitutes  rea- 
sonable rates  does  not  authorize  the  municipality  to 
contract  for  service  and  to  fix  a  definite  rate  which 
can  not  be  readjusted  from  time  to  time  as  changing 
conditions,  including  the  cost  of  the  service,  would 
justify. 

§  504.  Power  to  fix  rates  must  be  exercised  in 
manner  provided. — And  where  the  right  conferred 
upon  the  municipality  to  fix  the  rates  for  the  service 
furnished  by  municipal  public  utilities  is  to  be  exer- 
cised in  a  certain  manner  as  by  contract  or  franchise, 
the  municipality  can  not  exercise  the  power  in  any 
other  manner;  and  in  such  cases  an  ordinance  attempt- 
ing to  regulate  or  readjust  rates  in  any  other  way  than 
that  provided  by  the  statutory  provision  would  be 
clearly  invalid  and  of  no  effect  with  reference  to  a 
municipal  public  utility  which  had  already  received  a 
franchise  from  the  municipality  which  did  not  fix  the 
rate  or  retain  in  the  municipality  the  power  to  regulate 
it.  The  power  to  prescribe  rates  by  contract  or  to 
specify  them  in  a  franchise  is  very  different  from  the 
legislative  or  governmental  power  to  regulate  rates 
from  time  to  time,  nor  does  the  power  to  regulate  the 
manner  of  constructing  the  municipal  public  utility 
plant  in  the  streets  of  the  municipality  include  the 
authority  by  which  the  municipality  may  fix  the  rates 
to  be  charged  for  it. 


§  505  PUBLIC  UTILITIES.  57O 

§  505.     Power  to  regulate  rates  to  be  conserved. — 

Where,  therefore,  a  contract  is  entered  into  between 
a  miinicipaHty  and  a  municipal  public  utility  for  the 
providing  of  its  service  at  a  fixed  rate  and  the  munici- 
pality has  not  been  clearly  authorized  to  make  such 
a  contract,  it  only  constitutes  a  declaration  of  a  rea- 
sonable rate  which  may  be  modified  by  action  of  the 
state  or  the  municipality  pursuant  to  authority  con- 
ferred upon  it  for  this  purpose  by  the  state.  The 
power  conferred  upon  the  municipality  by  the  state 
to  contract  for  municipal  public  utility  service  does  not 
necessarily  include  the  power  to  fix  the  rates  for  the 
service  for  the  entire  period  of  the  contract;  and  where 
authority  to  fix  rates  for  a  fixed  period  is  not  clearly 
conferred  upon  the  municipality,  its  contract  attempt- 
ing to  do  so  is  not  binding  and  the  rates  so  fixed  may 
be  readjusted  and  another  rate  fixed,  provided  it  is 
a  reasonable  one.  It  is  often  expedient  for  the  munici- 
pality not  to  fix  a  definite  rate,  but  to  leave  the  matter 
open  so  that  it  may  be  determined  from  time  to  time 
as  the  increase  of  business  or  any  other  factor  by 
reducing  the  cost  of  the  service  enables  the  company 
to  reduce  the  rate.  The  right  to  regulate  rates  should 
remain  open  and  always  be  a  continuing  one  and  not 
be  exhausted  by  its  exercise  in  the  first  or  any  subse- 
quent instance;  for  it  is  in  the  interest  of  the  pubHc 
as  well  as  of  justice  that  this  right  be  exercised  from 
time  to  time  whenever  necessary  to  prevent  the  ex- 
istence of  inadequate  rates  or  extortion  on  the  part 
of  the  municipal  public  utility. 

§  506.  Rate  regulation  and  the  general  welfare. — 
Indeed,  this  matter  of  determining  the  proper  rate 
for  the  necessary  service  of  such  public  utilities  as 
water,  light  and  transportation  so  intimately  affects 
the  health,  welfare  and  comfort  of  the  citizens  as  to 
bring  it  within  the  scope  of  the  police  power  of  the 


571  MUNICIPAL    REGULATION.  §  506 

city,  because  if  the  rates  are  unreasonably  high  they 
will  be  prohibitive  to  a  certain  class  which  will  be  de- 
nied or  seriously  restricted  in  the  enjoyment  of  an 
adequate  water  service  which  in  turn  might  seriously 
impair  their  health,  and  by  unduly  restricting  the 
service  of  other  necessary  utilities,  would  materially 
interfere  with  the  comfort  and  welfare  of  the  citizens 
and  especially  the  poorer  and  more  dependent  classes. 
This  power  to  regulate  the  service  and  the  rate  to  be 
charged  for  it  in  connection  with  its  police  and  other 
general  powers  reserved  to  the  municipality  is  a  con- 
tinuing one,  and  while  it  may  not  be  exercised  arbi- 
trarily and  unreasonably  to  the  oppression  of  the  mu- 
nicipal public  utility,  justice  and  the  interests  of  all 
parties  in  the  end  require  that  the  right  of  regulation 
remain  free  and  untrammeled  so  that  it  may  be  exer- 
cised at  any  time  when  the  interests  of  the  public  or 
the  company  demand  it  because  of  changed  conditions 
controlling  the  cost  of  furnishing  the  service,  for  it  is 
well  established  that  the  law  assures  a  reasonable  rate 
even  against  governmental  regulation/ 

1  ALABAMA.— Bessemer  v.  Bessemer  Waterworks,  152  Ala.  391, 
44  So.  663;  Crosby  v.  Montgomery,  lOS  Ala.  49^:,  IS  So.  723. 

CALIFORNIA.— Ex  parte  Russell,  163  Cal.  668,  126  Pac.  875. 

FEDERAL.— Capital  City  Gas  Co.  v.  Des  Moines,  72  Fed.  818; 
Cleveland  City  R.  Co.  v.  Cleveland,  94  Fed.  3S5;  Home  Tel.  &  T.  Co. 
V.  Los  Angeles,  155  Fed.  554;  Illinois  Trust  &  Sav.  Bank  v.  Arkansas 
City  Water  Co.,  67  Fed.  196;  Los  Angeles  City  Water  Co.  v.  Los  An- 
geles, 88  Fed.  720;  Los  Angeles  City  Water  Co.  v.  Los  Angeles,  103 
Fed.  711;  Old  Colony  Trust  Co.  v.  Atlanta,  83  Fed.  39,  88  Fed.  859; 
Owensboro  v.  Cumberland  Tel.  &  T.  Co.,  174  Fed.  739;  Spring  Valley 
Water  Co.  v.  San  Francisco,  165  Fed.  667;  California-Oregon  Power 
Co.  V.  Grants  Pass.  203  Fed.  173;  Cumberland  Telephone  &  Tel.  Co. 
V.  Memphis.  200  Fed.  657;  Ft.  Smith  Light  &  Traction  Co.  v.  Ft. 
Smith,  202  Fed.  581. 

FLORIDA.— Gainesville  Gas  &  Electric  P.  Co.  v.  Gainesville, 
63  Fla.  425,  58  So.  785,  62  So.  919;  Jacksonville  v.  Southern  Bell  Tel. 
&  T.  Co.,  57  Fla.  374,  49  So.  509. 

ILLINOIS.— Chicago  Union  Traction  Co.  v.  Chicago,  199  111.  484, 
65  N.  E.  451,  59  L.  R.  A.  631;  Danville  v.  Danville  Water  Co.,  17S  111. 
299,  53  N.  E.  118,  69  Am.  St.  304;  Danville  v.  Danville  Water  Co.,  180 


§  507  PUBLIC   UTILITIES.  5/2 

§  507.     Power   to   fix   rates   may  be   delegated   to 

111.  235,  54  N.  E.  224;  Rogers  Park  Water  Co.  v.  Fergus,  178  111.  571, 
53  N.  E.  363,  180  U.  S.  624,  45  L.  ed.  702. 

INDIANA.— Richmond  v.  Richmond  Natural  Gas  Co.,  168  Ind. 
82,  79  N.  E.  1031. 

KENTUCKY.— Moberly  v.  Richmond  Tel.  Co.,  31  Ky.  L.  783,  103 
S.  W.  714;  Stites  v.  Norton,  125  Ky.  672,  101  S.  W.  1189. 

MASSACHUSETTS.— Murphy  v.  Worcester  Consol.  St.  R.  Co., 
199  Mass.  279,  85  N.  E.  507. 

MICHIGAN.— Boerth  v.  Detroit  City  Gas  Co.,  152  Mich.  654,  116 
N.  W.  628,  18  L.  R.  A.  (N.  S.)  1197. 

MISSOURI.— St.  Louis  v.  Bell  Tel.  Co.,  96  Mo.  623,  10  S.  W.  197; 
State  ex  rel.  Garner  v.  Missouri  &  K.  Tel.  Co.,  189  Mo.  83,  88  S.  W. 
41;   Joplin  v.  Wheeler  (Mo.),  158  S.  W.  924. 

NEW  JERSEY.— Long  Branch  Commission  v.  Tintern  Manor 
Water  Co.,  70  N.  J.  Eq.  71,  62  Atl.  474;  Public  Service  Corp.  v.  Ameri- 
can Lighting  Co.,  67  N.  J.  Eq.  122,  57  Atl.  482. 

NEW  MEXICO.— Agua  Pura  Co.  v.  Las  Vegas,  10  N.  Mex.  6,  60 
Pac.  208,  50  L.  R.  A.  224. 

NEW  YORK.— People  ex  rel.  v.  Willcox  (N.  Y.),  100  N.  E.  705. 

NORTH  CAROLINA.— Horner  v.  Oxford  Water  &  Electric  Co., 
153  N.  Car.  535,  69  S.  E.  607. 

OHIO.— Farmer  &  Getz  v.  Columbiana  County  Tel.  Co.,  72  Ohio 
St.  526,  74  N.  E.  1078;  State  ex  rel.  Sheets  v.  Toledo  Home  Tel.  Co., 
72  Ohio  St.  60,  74  N.  E.  162;  Zanesville  v.  Zanesville  Gas-Light  Co., 
47  Ohio  1.  23  N.  E.  55. 

OKLAHOMA.— South  McAlester-Eufaula  Tel.  Co.  v.  State,  25 
Okla.  524,  106  Pac.  962. 

TENNESSEE.- Knoxville  v.  Knoxville  Water  Co.,  107  Tenn.  647, 
64  S.  W.  1075,  61  L.  R.  A.  888. 

TEXAS.— Brownwood  v.  Brown  Tel.  &  T.  Co.  (Tex.),  157  S.  W. 
1163. 

UNITED  STATES.— Cleveland  v.  Cleveland  City  R.  Co.,  194  U. 
S.  517,  48  L.  ed.  1102;  Home  Tel.  &  T.  Co.  v.  Los  Angeles,  211  U.  S. 
265,  53  L.  ed.  176;  Interstate  Consol.  St.  R.  Co.  v.  Massachusetts,  207 
U.  S.  79,  52  L.  ed.  Ill;  Knoxville  Water  Co.  v.  Knoxville,  189  U.  S. 
434,  47  L.  ed.  887;  Los  Angeles  v.  Los  Angeles  City  Water  Co.,  177 
U.  S.  558,  44  L.  ed.  886;  Murray  v.  Pocatello,  226  U.  S.  318,  57  ed.; 
People's  Gaslight  &  Coke  Co.  v.  Chicago,  194  U.  S.  1,  28  L.  ed.  851; 
San  Diego  Land  &  Town  Co.  v.  National  City,  174  U.  S.  739,  43  L. 
ed.  1154,  74  Fed.  79;  Spring  Valley  Waterworks  v.  Schottler,  110 
U.  S.  347.  28  L.  ed.  173. 

WISCONSIN.— Manitowoc  v.  Manitowoc  &  Northern  Traction 
Co.,  145  Wis.  13,  129  N.  W.  925;  State  ex  rel.  Smythe  v.  Milwaukee 
Independent  Tel.  Co.,  133  Wis.  588,  114  N.  W.  108;  Milwaukee  Elec- 
tric Ry.  &  L.  Co.  V.  Railroad  Commission  (Wis.),  142  N.  W.  491. 


573  MUNICIPAL   REGULATION.  §  508 

municipality. — A  leading  case  dealing  with  the  ques- 
tion of  the  regulation  by  the  municipality  acting  under 
authority  delegated  to  it  by  the  state  of  the  municipal 
public  utility  service  and  the  determination  of  what 
constitutes  a  reasonable  rate,  together  with  the  fixing 
of  the  rate  determined  upon  by  the  municipality,  is 
that  of  San  Diego  Land  &  Town  Co.  v.  National  City, 
174  U.  S.  739,  74  Fed.  79,  43  L.  ed.  1154,  decided  in 
1899.  In  the  course  of  its  opinion  the  court  said: 
"That  it  was  competent  for  the  state  of  California  to 
declare  that  the  use  of  all  water  appropriated  for  sale, 
rental  or  distribution  should  be  a  public  use,  and  sub- 
ject to  public  regulation  and  control,  and  that  it  could 
confer  upon  the  proper  municipal  corporation  power 
to  fix  the  rates  of  compensation  to  be  collected  for  the 
use  of  water  supplied  to  any  city,  county  or  town,  or 
to  the  inhabitants  thereof,  is  not  disputed,  and  is  not, 
as  we  think,  to  be  doubted." 

§  508.  Policy  of  local  control  over  purely  local 
matters. — Under  the  power  delegated  to  the  munici- 
pality by  the  state  to  regulate  the  use  of  its  streets 
and  the  service  rendered  by  the  municipal  public  util- 
ity, the  municipality  as  the  local  agency  of  the  state 
enjoys  extensive  power  of  regulation  and  control  by 
virtue  of  which  the  responsibility  of  securing  for  itself 
and  its  inhabitants  adequate  service  at  reasonable  rates 
is  imposed  upon  it,  for  as  the  court  in  the  case  of 
Owensboro  v.  Cumberland  Tel.  &  T,  Co.,  174  Fed. 
739.  decided  in  1909,  says:  "That  power  to  permit  the 
use  of  highways  and  streets  for  such  purposes  must 
reside  somewhere  is  obvious.  Primarily,  it  resides  in 
the  legislature  of  each  state,  but,  as  is  well  known,  is 
almost  universally  delegated  to  the  municipality  con- 
cerned. Reasons  of  convenience,  as  well  as  theories  of 
local  rule  in  strictly  local  matters,  lead  us  to  expect 
that  the  local  government  has  the  power  to  regulate 


§  509  PUBLIC   UTILITIES.  574 

the  use  of  its  own  streets.  ...  If,  then,  such  a 
use  is  within  the  general  objects  and  purposes  to  be 
served  by  the  power  of  opening  and  maintaining  pub- 
lic streets,  why  is  the  grant  of  a  right  to  so  use  the 
public  streets  an  act  beyond  the  powers  of  the  munici- 
pal legislature?  What  power  is  delegated  by  the  ex- 
press power  to  'regulate'  the  streets  and  alleys  of  the 
city?  Manifestly,  something  was  meant  by  the  power 
to  'regulate.'  The  word  'regulate'  imports  the  power 
to  control  the  use  of  the  streets,  and  is  indeed  a  word 
of  wider  import  than  'control'  or  the  power  to  'con- 
sent' to  an  easement  of  way." 

§  509.  Municipal  authorities  competent  to  fix  rates 
for  action  official. — The  leading  case  of  Spring  Valley 
.Water  Works  v.  Schottler,  no  U.  S.  347,  28  L.  ed. 
173,  decided  in  1884,  indicates  that  for  many  years  the 
right  has  commonly  been  conferred  upon  municipali- 
ties to  control  the  service  and  to  regulate  the  rates 
of  municipal  public  utilities  and  that  the  municipal 
officers  are  competent  to  exercise  such  right,  although 
the  municipality  receiving  the  service  is  a  party  to  the 
relation,  because  their  action  is  official,  for  as  the 
court  says :  "Long  before  the  constitution  of  1879  was 
adopted  in  California,  statutes  had  been  passed  in 
many  of  the  states  requiring  water  companies,  gas 
companies  and  other  companies  of  like  character,  to 
supply  their  customers  at  prices  to  be  fixed  by  the 
municipal  authorities  of  the  locality;  and,  as  an  inde- 
pendent proposition,  we  see  no  reason  why  such  a 
regulation  is  not  within  the  scope  of  legislative  power, 
unless  prohibited  by  constitutional  limitations  or  valid 
contract  obligations.  Whether  expedient  or  not  is  a 
question  for  the  legislature,  not  the  courts.  It  is  said, 
however,  that  appointing  municipal  officers  to  fix 
prices  between  the  seller  and  the  buyers  is,  in  efifect. 


t 


575  MUNICIPAL    REGULATION.  §  509 

appointing  the  buyers  themselves,  since  the  buyers 
elect  the  officers,  and  that  this  is  a  violation  of  the 
principle  that  no  man  shall  be  a  judge  in  his  own  case. 
But  the  officers  here  selected  are  the  governing  board 
of  the  municipality,  and  they  are  to  act  in  their  official 
capacity  as  such  a  board  when  performing  the  duty 
which  has  been  imposed  upon  them.  Their  general 
duty  is,  within  the  limit  of  their  powers,  to  administer 
the  local  government  and,  in  so  doing,  to  provide  that 
all  shall  so  conduct  themselves  and  so  use  their  own 
property  as  not  unnecessarily  to  injure  others.  They 
are  elected  by  the  people  for  that  purpose,  and  what- 
ever is  within  the  just  scope  of  the  purpose  may  prop- 
erly be  intrusted  to  them  at  the  discretion  of  the  leg- 
islature." 

This  well-established  principle  of  the  right  of  mu- 
nicipal officers,  under  proper  authority  to  exercise  the 
power  of  regulating  the  rates  to  be  charged  for  mu- 
nicipal public  utility  service,  has  never  been  questioned 
except  by  the  court  in  the  case  of  Agua  Pura  Co.  v. 
Las  Vegas,  lo  N.  Mex.  6,  60  Pac.  208,  50  L.  R.  A.  224, 
decided  in  1900,  which  evidently  overlooked  the  deci- 
sion in  the  case  of  Spring  Valley  Water  Works  v. 
Schottler,  supra,  as  well  as  a  number  of  decisions 
sustaining  it,  for  in  the  course  of  its  opinion,  denying 
the  power  of  the  legislature  to  delegate  the  right  to 
regulate  rates  to  a  municipality,  which  is  generally 
permitted,  the  court  said:  "Among  the  numerous 
cases  involving  this  question  of  regulation,  in  various 
forms,  which  have  been  arising  under  the  state  and 
federal  courts,  we  have  been  referred  to  none,  nor  are 
we  aware  of  any  such,  in  which  a  delegation  by  the 
legislature  of  power  to  regulate  rates,  in  matters  of 
this  and  similar  nature,  to  a  subordinate  authority, 
which  was  itself  interested  as  a  purchaser  or  consumer, 
has  been  upheld." 


§510 


PUBLIC   UTILITIES. 


S7^ 


§  510.  Duty  of  municipality  to  prevent  excessive 
rates. — Indeed,  some  of  our  courts  have  decided  that 
in  the  absence  of  statutory  authority  it  is  the  duty  of 
the  municipality  to  protect  its  inhabitants  in  the  mat- 
ter of  municipal  public  utility  service  by  requiring 
that  such  service  be  rendered  at  reasonable  rates,  for 
as  the  court  in  the  case  of  Long  Branch  Commission 
V.  Tintern  Manor  Water  Co.,  70  N.  J.  Eq.  71,  62  Atl. 
474,  decided  in  1905,  says:  "But,  independent  of  such 
statutory  provision,  I  think  it  is  the  province  and  the 
duty  of  the  municipality,  whenever  opportunity  offers, 
to  exercise  its  power  in  the  protection  of  its  inhabitants 
against  extortion,  and  to  secure  them  a  supply  of 
water  and  of  gas  from  corporations,  assuming  to  fur- 
nish those  commodities,  at  reasonable  rates.  The 
water  company  is  exercising  a  public  franchise,  which, 
from  its  nature  and  mode  of  exercise,  is  necessarily, 
during  its  continuance,  a  practical  monopoly,  and  it 
follows  beyond  all  question  that  its  charges  for  its 
supply  must  be  reasonable.  And  it  would  be  strange 
indeed  if  the  municipal  government,  which,  so  to  speak, 
imposes  this  monopoly  upon  its  citizens,  were  power- 
less  to   protect   them    against    unreasonable    charges." 


§511.  Rate  subject  to  change  by  state  if  made 
without  authority. — Where  the  municipal  public  utility 
is  required  to  secure  consent  of  the  municipality  be- 
fore instaling  its  plant  and  furnishing  its  service,  the 
municipality  having  the  power  to  grant  its  consent  on 
such  reasonable  conditions  as  it  sees  fit,  may  stipulate 
as  to  the  rates  to  be  charged  for  the  service  rendered. 
Unless,  however,  the  municipality  is  specifically  em- 
powered to  fix  the  rate  for  the  service  rendered  by 
contract  and  thereby  suspend  the  exercise  of  the  gov- 
ernmental power  to  regulate  rates  during  the  period 
of   the    contract,    the   rates    so   fixed    may   be    changed 


577  MUNICIPAL    REGULATION.  §511 

by  the  state  in  the  exercise  of  its  governmental  power 
of  regulation,  and  the  contract  of  the  municipality  fix- 
ing the  rates  without  authority  conferred  upon  it  by 
the  state  continues  only  until  suspended  by  action  on 
the  part  of  the  state  or  a  commission  selected  by  it  to 
fix  another  and  different  rate,  for  as  the  court  in  the 
case  of  Manitowoc  v,  Manitowoc  &  Northern  Traction 
Co.,  145  Wis.  13,  129  N.  W.  925,  decided  in  1910,  says: 
"Inasmuch  as  the  city  might  on  any  terms  refuse  its 
consent  to  the  use  of  its  streets  by  interurban  cars,  we 
see  no  reason  why  it  might  not  exact  any  condition 
it  saw  fit,  provided  they  were  not  unlawful  in  them- 
selves, and  as  to  the  parties  to  the  contract  there  was 
nothing  unlawful  about  the  condition  we  are  consid- 
ering. .  .  .  That  the  legislature  of  the  state  might 
expressly  empower  cities  to  make  such  contracts  as 
the  one  in  question  is  well  settled.  In  passing  such 
an  ordinance  as  we  have  before  us,  a  city,  proceeding 
under  a  grant  of  power  specifically  conferred,  acts  as 
the  agent  of  the  state,  and  the  public  is  concluded  by 
the  contract  during  its  life,  and  its  obligations  could 
not  be  impaired  by  subsequent  legislative  actions,  un- 
less it  were  held  that  the  ordinance  was  part  of  the 
charter  of  the  railway  company  and  subject  to  amend- 
ment or  repeal  under  section  i  of  article  11  of  our 
constitution.  Otherwise,  a  state  may,  in  matter  of 
proprietary  rights,  exclude  itself  and  authorize  its  mu- 
nicipal corporations  to  exclude  themselves  from  the 
right  of  regulating  rates.  .  .  .  Statutes  granting  to 
the  cities  the  right  to  make  long-time  contracts  bind- 
ing on  the  public,  and  fixing  a  rate  to  be  charged  by 
a  public  service  corporation,  are  not  looked  upon  with 
favor,  and  will  be  strictly  construed.  It  is  only  where 
the  right  is  very  clearly  conferred  that  the  state  will 
be  held  to  have  relinquished  its  power  to  enact  laws 
regulating  tolls.  .  .  .  No  specific  authority  having 
37— Pub.  Ut. 


§512  PUBLIC   UTILITIES.  578 

been  conferred  on  the  city  to  enter  into  the  contract 
in  question,  the  right  of  the  state  to  interfere  when- 
ever the  pubhc  weal  demanded  was  not  abrogated. 
The  contract  remained  vaHd  between  the  parties  to 
it  until  such  time  as  the  state  saw  fit  to  exercise  its 
paramount  authority,  and  no  longer.  To  this  extent 
and  to  this  extent  only  is  the  contract  before  us  a 
valid  subsisting  obligation.  It  would  be  unreasonable 
to  hold  that  by  enacting  section  1862  or  section  1863, 
St.  1898,  the  state  intended  to  surrender  its  govern- 
mental power  of  fixing  rates.  That  power  was  only 
suspended  until  such  time  as  the  state  saw  fit  to  act. 
.  .  .  The  railroad  commission  has  made  no  deter- 
mination in  the  case  before  us;  at  least,  if  it  has,  it  is 
no  part  of  the  record.  Until  that  determination  is 
made,  the  contract  is  in  force.  When  it  is  made,  the 
contract  is  superseded,  if  the  rate  is  changed." 

§  512.  Delegated  power  to  fix  rate  binding  until 
revoked. — Where,  however,  the  state  does  confer  au- 
thority upon  the  municipality  by  clearly  empowering 
it  to  contract  for  the  service  of  municipal  public  util- 
ities and  to  fix  the  rate  for  the  service,  such  a  contract 
when  executed  pursuant  to  the  authority  so  delegated 
to  the  municipality  is  a  valid  obligation  which  can  not 
be  impaired  by  action  on  the  part  of  the  state  in  chang- 
ing the  rate  fixed  in  such  a  contract,  although  the  au- 
thority may  be  revoked  at  any  time  by  a  repeal  of  the 
statute  granting  it,  which  would  terminate  the  power 
of  the  city  to  contract  for  such  service  at  a  fixed 
rate,  for  as  the  court  in  the  case  of  Los  Angeles  City 
Water  Co.  v.  Los  Angeles,  88  Fed.  720,  decided  in 
1898,  says:  "The  power  of  the  city  of  Los  Angeles 
to  agree  upon  water  rates,  I  think,  is  fairly  implied  in 
the  power  'to  provide  for  supplying  the  city  with 
water,'  and  therefore  falls  within  the  second  class  of 


579  MUNICIPAL    REGULATION.  §513 

powers  enumerated  by  Judge  Dillon.  .  .  .  This 
delegation  of  power  to  the  city  was  not,  of  course,  a 
relinquishment  by  the  legislature  of  its  control  over 
the  subject.  The  legislature  could  at  any  time  revoke 
the  power  delegated  to  the  city,  and  provide  directly, 
through  agencies  of  its  own  selection,  for  supplying 
the  city  with  water,  provided  such  revocation  or  pro- 
vision should  not  impair  any  previously  vested  rights." 

§  513.  Statutory  construction  of  power  to  regulate 
and  fix  rates. — The  courts,  however,  are  not  agreed 
in  their  interpretation  of  the  statutory  enactments  con- 
ferring upon  municipalities  the  power  to  regulate  and 
determine  the  service  and  the  rates  of  municipal  public 
utilities  with  regard  to  the  expression  necessary  to 
confer  power  on  the  municipality  to  fix  the  rates  in 
connection  with  contracting  for  the  service.  "The 
power  to  fix  and  determine  the  charges"  for  such 
service  does  not  give  the  municipality  the  right  to 
contract  for  the  service  at  a  fixed  price,  but  only  to 
regulate  the  rate  from  time  to  time;  it  is  conceded, 
however,  that  the  municipal  authorities  are  competent, 
although  the  municipality  is  an  interested  party,  to 
regulate  the  rates,  for  as  the  Supreme  Court  of  the 
United  States  in  the  case  of  Home  Tel.  &  T.  Co.  v. 
Los  Angeles,  211  U.  S.  265,  53  L.  ed.  176,  decided  in 
1908,  says:  "The  power  to  fix,  subject  to  constitu- 
tional limits,  the  charges  of  such  a  business  as  the  fur- 
nishing to  the  public  of  telephone  service,  is  among 
the  powers  of  government,  is  legislative  in  its  char- 
acter, continuing  in  its  nature,  and  capable  of  being 
vested  in  a  municipal  corporation.  ...  It  has  been 
settled  by  this  court  that  the  state  may  authorize  one 
of  its  municipal  corporations  to  establish,  by  an  in- 
violable contract,  the  rates  to  be  charged  by  a  public 
service  corporation    [or  natural  person]    for  a  definite 


§513 


PUBLIC   UTILITIES. 


580 


term,  not  grossly  unreasonable  in  point  of  time,  and 
that  the  effect  of  such  a  contract  is  to  suspend,  during 
the  life  of  the  contract  the  governmental  power  of 
fixing  and  regulating  the  rates.  Detroit  v.  Detroit 
Citizens'  Street  R.  Co.,  184  U.  S.  368,  46  L.  ed.  592; 
Vicksburg  v.  Vicksburg  Waterworks  Co.,  206  U.  S. 
496,  51  L.  ed.  II 55.  But  for  the  very  reason  that  such 
a  contract  has  the  effect  of  extinguishing  pro  tanto 
an  undoubted  power  of  government,  both  its  existence 
and  the  authority  to  make  it  must  clearly  and  unmis- 
takably appear,  and  all  doubts  must  be  resolved  in 
favor  of  the  continuance  of  the  power.  .  .  .  The 
facts  in  this  case,  which  seem  to  us  material  upon  the 
questions  of  the  authority  of  the  city  to  contract  for  rates 
to  be  maintained  during  the  term  of  the  franchise,  are  as 
follows:  The  charter  gave  to  the  council  the  power  'by 
ordinance  ...  to  regulate  telephone  service  and  the 
use  of  telephones  within  the  city,  .  .  .  and  to  fix 
and  determine  the  charges  for  telephones  and  tele- 
phone service  and  connections.'  This  is  an  ample 
authority  to  exercise  the  governmental  power  of  reg- 
ulating charges,  but  it  is  no  authority  to  enter  into  a 
contract  to  abandon  the  governmental  power  itself. 
It  speaks  in  words  appropriate  to  describe  the  author- 
ity to  exercise  the  governmental  power,  but  entirely 
unfitted  to  describe  the  authority  to  contract.  It  au- 
thorizes command,  but  not  agreement.  Doubtless,  an 
agreement  as  to  rates  might  be  authorized  by  the 
legislature  to  be  made  by  ordinance.  But  the  ordi- 
nance here  described  was  not  an  ordinance  to  agree 
upon  the  charges,  but  an  ordinance  *to  fix  and  deter- 
mine the  charges.'  It  authorizes  the  exercise  of  the 
governmental  power  and  nothing  else.  .  .  .  The 
appellant  further  insists  that  the  city  council  is  not  an 
impartial  tribunal,  because,  in  effect,  it  is  a  judge  in 
its  own  case.     It  is  too  late,  however,  after  the  many 


581  MUNICIPAL   REGULATION.  §  514 

decisions  of  this  court  which  have  either  decided  or 
recognized  that  the  governing  body  of  a  city  may  be 
authorized  to  exercise  the  rate-making  function,  to 
ask  for  a  reconsideration  of  that  proposition." 

§  514.  Power  to  regulate  rates  not  surrendered  by 
implication. — In  construing  this  same  expression  of 
the  power  conferred  upon  the  municipality  "to  fix  and 
determine"  the  rate  received  for  the  service  under  a 
contract  entered  into  by  the  defendant  city  for  a  term 
of  fifty  years,  the  court  in  the  case  of  Home  Tel.  & 
T.  Co.  V.  Los  Angeles,  155  Fed.  554,  decided  in  1892, 
held  that  as  the  intention  of  the  city  to  abandon  its 
right  to  regulate  the  matter  by  fixing  the  rate  from 
time  to  time  during  the  period  of  the  contract  did  not 
clearly  appear,  the  municipality  was  not  precluded 
from  doing  so  by  virtue  of  the  contract,  for  as  the 
court  said:  "Is  it  true  that,  by  the  provisions  of  said 
section  of  said  ordinance,  the  city  of  Los  Angeles 
abandoned,  for  fifty  years,  its  right  to  reasonably  limit 
plaintiff's  charges  for  telephone  service?  Can  it  be 
said  that  the  abandonment  of  the  power  in  question 
has  been  'shown  by  clear  and  unambiguous  language, 
which  will  admit  of  no  reasonable  construction  con- 
sistent with  the  reservation  of  the  power'?  Certainly 
there  is  no  express  abandonment,  and  the  circum- 
stances of  this  case,  particularly  the  long  period  of 
fifty  years,  forbid  an  implication  of  that  sort.  I  do 
not  mean  to  assert  that,  if  a  contract  unequivocally 
abandoned  a  legislative  power  for  fifty  years,  the  dura- 
tion of  the  abandonment  would  itself  avoid  the  con- 
tract ;  but  what  I  do  say  is  that  such  a  long  period  is 
a  strong,  if  not  conclusive,  reason  why  an  abandon- 
ment should  not  be  implied." 

A  further  decision  to  the  eflfect  that  the  power  of 
the  municipality  to  regulate  rates  is  a  continuing  one, 


§  515  PUBLIC   UTILITIES.  582 

and  that  the  right  to  exercise  it  at  any  time  can  not 
be  surrendered  by  an  agreement  except  in  the  case  of 
a  contract  clearly  and  expressly  so  providing,  pursuant 
to  legislative  authority  clearly  and  unequivocally  con- 
ferring such  power  upon  the  municipality  and  that 
even  then  this  right  of  the  municipality  has  sometimes 
been  questioned,  is  furnished  by  the  case  of  Los  An- 
geles V.  Los  Angeles  City  Water  Co.,  177  U.  S.  558, 
44  L.  ed.  886,  decided  in  1900,  vv^here  the  court  said: 
"It  is  not  denied  that  the  city  had  power  to  regulate 
rates.  Indeed,  it  is  insisted  that  it  was  so  constantly 
its  duty  that  it  could  not  be  contracted  away.  It  was 
not  a  power,  therefore,  necessary  to  be  granted  by  the 
contract,  and  the  distinction  between  the  proprietary 
right  and  the  municipal  right,  made  by  appellants, 
would  have  been  idle  to  observe.  To  have  limited 
the  right  of  regulation  to  the  city  in  one  capacity,  and 
left  it  unrestrained  in  the  other,  would  have  been  use- 
less, and  such  intention  can  not  be  attributed  to  the 
parties.  We  think,  therefore,  the  power  to  regulate 
rates  was  an  existent  power,  not  granted  by  the  con- 
tract, but  reserved  from  it,  with  a  single  limitation — 
the  limitation  that  it  should  not  be  exercised  to  reduce 
rates  below  what  was  then  charged.  Undoubtedly 
there  was  a  contractual  element;  it  was  not,  however, 
in  granting  the  power  of  regulation,  but  in  the  limita- 
tion upon  it." 

§  515.  Rates  fixed  by  contracts  not  clearly  author- 
ized held  declaratory  only. — Under  the  authority  con- 
ferred upon  the  municipality  by  the  state  to  make  a 
contract  for  the  service  of  a  municipal  public  utility 
to  be  furnished  to  itself  and  to  its  inhabitants,  the 
municipality  has  not  by  virtue  of  this  fact  nor  by  im- 
plication, authority  to  fix  the  rate  on  making  the  con- 
tract to  be  received  for  such  service  during  the  entire 


583  MUNICIPAL   REGULATION.  §5l6 

period  covered  by  the  contract,  but  such  rate  is  only 
a  declaration  of  what  the  municipality  at  the  time 
agreed  was  a  reasonable  one.  Such  a  stipulation  does 
not  preclude  the  municipality  or  the  state  from  raising 
the  question  as  to  the  reasonableness  of  the  rate  and 
readjusting  it  at  any  time  so  long  as  the  rate  fixed  is 
reasonable. 

§  516.  Strict  construction  saves  right  to  regulate 
if  rate  not  expressly  covered. — This  matter  of  the  con- 
struction of  the  statutory  enactments  authorizing  mu- 
nicipalities to  regulate  and  control  the  service  of  mu- 
nicipal public  utilities  and  their  charges  is  one  about 
which  the  courts  are  not  agreed,  so  that  different 
results  are  reached  by  the  decisions  in  the  different 
jurisdictions,  not  only  where  the  statutory  enactments 
are  different,  but  also  by  a  different  construction  based 
upon  practically  the  same  statutory  provisions.  There 
is  a  series  of  decisions  by  the  Supreme  Court  of  Illi- 
nois to  the  effect  that  the  power  of  the  municipality 
to  regulate  the  rates  is  a  governmental  one  which  is 
continuing  in  its  nature  and  which  is  not  exhausted 
by  a  stipulation  in  its  contract  executed  pursuant  to 
statutory  authority  conferred  upon  the  municipality  to 
contract  for  such  a  service  without  clearly  or  expressly 
stipulating  for  the  power  to  fix  upon  a  rate  for  the 
contract  period. 

These  decisions  of  the  Supreme  Court  of  Illinois 
to  the  effect  that  an  ordinance  granting  the  necessary 
consent  of  the  city  to  the  use  of  its  streets  by  the 
municipal  corporation  and  contracting  for  its  service 
for  a  period  of  years,  although  it  contained  a  schedule 
of  rates  to  be  charged,  does  not  bind  the  city  to  those 
rates  for  the  entire  contract  period,  but  is  at  the  most 
a  declaration  of  what  constitutes  a  reasonable  rate  at 
the    time    the    ordinance    was    enacted    were    sustained 


§5l6  PUBLIC   UTILITIES.  584 

by  the  Supreme  Court  of  the  United  States  on  the 
ground  that  the  nature  and  the  extent  of  the  power 
delegated  to  the  municipality  was  uncertain  and  that 
as  the  statutory  enactment  was  ambiguous  it  should 
be  construed  in  favor  of  the  public  by  reserving  to  the 
municipality  the  continued  right  to  regulate  the  rates 
and  readjust  them  from  time  to  time  as  conditions 
changed,  for  as  the  court  in  the  case  of  Rogers  Park 
Water  Co.  v.  Fergus,  178  111.  571,  53  N.  E.  363,  which 
was  sustained  by  the  Supreme  Court  of  the  United 
States  as  reported  in  180  U.  S.  624,  45  L.  ed.  702,  said: 
"We  do  not  think  the  adoption  of  the  alleged  ordi- 
nance by  the  village  of  Rogers  Park,  and  the  accept- 
ance and  fulfillment  of  the  conditions  thereof  by  the 
appellant  company,  vested  it,  as  with  a  property  right, 
with  the  power  to  demand  that  the  rates  named  in  the 
ordinance  should  remain  fixed  and  unchanged  for  the 
period  in  which  it  was  licensed  to  occupy  the  streets 
of  the  village,  or  that  the  ordinance  and  its  acceptance 
constituted  a  contract,  or  that  any  contract  obligations 
arose  by  reason  thereof.  .  .  .  The  power  possessed 
by  the  state  to  enforce  the  duty  might  be  properly 
exercised  by  establishing  a  scale  of  rates  and  prices 
to  be  demanded  by  the  company  from  the  inhabitants 
of  the  village,  and  this  power,  and  that  mode  of  exer- 
cising it,  were  delegated  by  the  state  to  the  village 
by  section  i,  article  10,  chapter  24,  of  our  statutes  (i 
Starr  &  C.  Ann.  St.  1896,  p.  785).  The  village  exer- 
cised the  power  by  incorporating  in  the  ordinance  a 
scale  of  prices  as  being  just  and  reasonable  maximum 
rates  to  be  paid  to  the  company  by  the  consumer  of 
water.  This  provision  of  the  ordinance  had  no  effect 
to  establish  a  contract  between  the  appellant  company 
and  the  village  that  the  individual  inhabitants  of  the 
village  should  and  would  pay  such  rates  for  the  period 
of  thirty  years,  or  any  fixed  period  of  time,  but  was 


585  MUNICIPAL   REGULATION.  §517 

simply  a  declaration  on  the  part  of  the  village  that 
such  rates  were  reasonable.  ...  A  rate  or  price 
reasonable  and  just  when  fixed  may,  in  the  future, 
become  so  unreasonably  high  that  the  exaction  of  such 
rate  or  price  is  but  an  extortion.  The  duty  of  the  cor- 
poration does  not,  however,  change,  but  remains  the 
same;  that  is,  to  exact  only  reasonable  compensation. 
The  power  of  the  state  to  enforce  that  duty  is  not 
exhausted  by  its  exercise  in  the  first  or  any  subse- 
quent instance,  but  is  continuous,  and  may  be  exerted 
from  time  to  time,  whenever  necessary,  to  prevent 
extortion  by  the  agency  created  by  the  state  to  serve 
the  public." 

§517.  Right  to  regulate  under  reserved  right  to 
alter,  amend  or  repeal. — This  line  of  authorities  per- 
mitting the  municipality  to  regulate  and  readjust  rates 
from  time  to  time  after  having  made  a  contract  for 
the  service  of  the  municipal  public  utility  for  a  fixed 
period  without  authority  clearly  conferred  upon  it  by 
the  state  to  fix  the  rate  for  the  entire  period  of  the 
contract  is  based  on  the  right  commonly  reserved  by 
the  state  or  its  agency  to  alter,  amend  or  repeal  its 
grants  of  franchise  rights,  for  as  the  court  in  the  case 
of  Danville  v.  Danville  Water  Co.,  178  111.  299,  53  N. 
E.  118,  69  Am.  St.  304,  decided  in  1899,  says:  "The 
authority  'to  contract  for  a  supply  of  water  for  public 
use  for  a  period  not  exceeding  thirty  years,  does  not 
necessarily  imply  that  the  price  of  the  supply  should 
be  fixed  for  the  entire  period.  ...  In  section  i  of 
article  10  of  the  city  and  village  act,  approved  April 
10,  1872.  in  force  July  i,  1872,  it  is  provided  as  fol- 
lows: 'The  city  council  .  .  .  shall  have  the  power 
to  provide  for  a  supply  of  water  ...  by  the  con- 
struction and  regulation  of  .  .  .  water-works,  and 
to  borrow  money  therefor,  and  to  authorize  any  per- 


§5l8  PUBLIC   UTILITIES.  586 

son  or  private  corporation  to  construct  and  maintain 
the  same  at  such  rates  as  may  be  fixed  by  ordinance, 
and  for  a  period  not  exceeding  thirty  years.'  .  .  . 
The  meaning  of  this  language  is  not  that  the  water- 
works are  to  be  maintained  at  such  established  rate 
as  may  be  fixed  by  one  ordinance  for  a  period  not 
exceeding  thirty  years.  The  clause  'for  a  period  not 
exceeding  thirty  years'  qualifies  the  words  'construct 
and  maintain  the  same,'  but  does  not  qualify  the  words 
'at  such  rates  as  may  be  fixed  by  ordinance.'  In  other 
words,  the  city  council  may  authorize  a  private  cor- 
poration to  construct  and  maintain  water-works  for  a 
period  not  exceeding  thirty  years,  and  they  may  au- 
thorize a  private  corporation  to  construct  and  maintain 
the  water-works  at  such  rates  as  may  from  time  to 
time  be  fixed  by  ordinance.  The  evident  meaning  of 
section  i  is  that  there  was  to  be  reserved  to  the  city 
council  the  power  to  fix  the  rates  by  ordinance  at 
such  figures  as  should  be  fair  and  reasonable.  .  .  . 
The  price  to  be  paid  for  water  should  be  left  to  be 
determined  from  time  to  time,  inasmuch  as  the  growth 
of  the  city  will  enable  the  company  to  furnish  water 
at  much  less  cost  than  when  the  water-works  were 
first  established." 

§  518.  Regulation  continuing  and  akin  to  police 
power. — The  question  of  the  power  vested  in  munici- 
palities to  determine  the  rate  to  be  charged  for  the 
service  rendered  and  of  the  construction  of  the  stat- 
utory enactments  conferring  the  power  of  regulation 
upon  municipalities  by  the  state  is  a  subject  upon 
which  the  courts  are  not  agreed.  Because  it  is  a 
question  of  statutory  construction  as  well  as  of  statu- 
tory expression  and  because  it  is  important  that  the 
regulation  of  the  rates  remain  continually  in  the  mu- 
nicipality, the  decisions  favor  a  strict  construction  and 


587  MUNICIPAL   REGULATION.  §518 

deny  the  right  of  the  municipality  to  preclude  itself 
from  the  exercise  of  its  right  to  regulate  rates  from 
time  to  time  unless  it  has  clearly  done  so  under  ample 
authority  conferred  upon  it  by  the  state  for  that  pur- 
pose, for  as  the  court  in  the  case  of  Knoxville  v.  Knox- 
ville  Water  Co.,  107  Tenn.  647,  64  S.  W.  1075,  61  L. 
R.  A.  888,  decided  in  1901,  says:  "Under  the  cases 
we  have  cited,  and  others  that  might  be  collated,  it  is, 
we  think,  apparent  that  the  authorities  are  not  agreed 
as  to  whether  the  state  can  by  legislative  grant  em- 
power a  municipality  to  enter  into  an  irrevocable  and 
perpetual  contract  with  a  water  company  or  other 
private  or  quasi  public  corporation  for  a  system  of 
water-works  and  a  supply  of  water,  and  whether  such 
company  can  by  legislative  grant  be  removed  from 
the  supervision  of  the  police  power  of  the  municipality, 
yet  we  think  there  is  no  question  but  that,  in  order  to 
do  so,  the  legislative  grant  must  be  unquestionable, 
and  admit  of  no  other  construction,  but  must  be  plain, 
positive  and  unequivocal.  If  the  municipality  has  no 
such  power  under  legislative  grant,  it  can  make  no 
such  contract;  nor  can  it  waive  its  police  powers,  or 
refuse  to  exercise  them,  when  the  good  of  the  citizens 
of  the  municipality  demands.  .  .  .  While  the  rate 
to  be  paid  for  water  is  not  so  palpably  a  regulation 
within  the  police  supervision  of  a  city  as  is  the  purity 
and  supply  of  the  water  furnished,  yet  the  rate  of 
charge  is  a  matter  which  afifects  the  health,  welfare 
and  comfort  of  the  city,  since,  if  rates  are  unreason- 
ably high,  they  will  prove  a  restriction  upon  the  use 
of  water  which  may  seriously  impair  the  health  and 
interfere  with  the  comfort  and  welfare  of  the  people — 
especially  the  poorer  classes,  who  by  reason  of  high 
prices  may  be  cut  off  from  the  benefit  of  the  water 
partially  or  altogether.  .  .  .  The  language  of  the 
city  charter  in  the  present  case  is  not  that  the  corpo- 


§5l8  PUBLIC   UTILITIES.  588 

rate  authorities  shall  have  power  by  ordinance  to  fix, 
but  to  regulate,  the  price  of  water  to  be  supplied  by- 
such  company,  and  in  the  same  connection  the  full 
police  and  general  powers  of  the  corporation  are  re- 
served to  it.  We  are  of  opinion  that  the  right  to 
regulate  rates  was  not  exhausted  by  an  agreement  at 
any  particular  time  upon  a  schedule  of  prices,  but  it 
is  a  continuing  right,  under  the  terms  of  the  charter, 
but  not  to  be  exercised  arbitrarily  and  unreasonably." 
In  sustaining  this  decision  the  Supreme  Court  of 
the  United  States  in  the  case  of  Knoxville  Water  Co. 
V.  Knoxville,  189  U.  S.  434,  47  L.  ed.  887,  decided  in 
1903,  by  way  of  construing  the  right  of  this  municipal 
public  utility,  said:  "The  water  company  was  incor- 
porated in  Tennessee  in  1882  to  construct  water-works 
in  or  near  Knoxville,  with  power  to  contract  with 
the  city  and  inhabitants  for  the  supply  of  water,  and 
to  'charge  such  prices  for  the  same  as  may  be  agreed 
upon  between  said  company  and  said  parties.'  This 
incorporation  was  under  a  general  act  which  provides 
as  follows:  'And  this  [act]  is  in  no  way  to  interfere 
with  or  impair  the  police  or  general  powers  of  the 
corporate  authorities  of  such  city,  town  or  village, 
and  such  corporate  authorities  shall  have  power  by 
ordinance  to  regulate  the  price  of  water  supplied  by 
such  company.'  .  .  .  'Said  company  will  supply 
private  consumers  with  water  at  a  rate  not  to  exceed 
five  cents  per  100  gallons,'  subject  to  an  immaterial 
proviso.  These  are  the  words  relied  on  by  the  com- 
pany. They  are  assumed  to  contain  an  impHed  under- 
taking on  the  part  of  the  city  not  to  interfere  with  the 
company  in  establishing  rates  within  the  contract  lim- 
its. ...  In  the  present  case  it  seems  to  us  impos- 
sible to  suppose  that  any  power  to  contract  which  the 
city  may  have  had  was  intended  to  be  exercised  in 
such   a  way   as   to   displace   the   municipal   power   ex- 


589  MUNICIPAL   REGULATION.  §  519 

pressly  reserved  or  given  by  the  general  law  under 
which  the  water  company  was  created.  It  would  re- 
quire stronger  words  than  those  used  here  to  raise 
the  question  whether,  under  the  statutes  in  force,  the 
city  could  do  it  if  it  tried.  The  contracts  fixing  prices 
authorized  by  the  statute  were  contracts  between  the 
company  and  its  customers,  not,  as  in  the  case  of  the 
railway  company,  a  single  contract  between  the  com- 
pany and  the  city,  and  were  subject  to  the  power  to 
regulate  them  given  to  the  city  by  the  same  statute." 

§  519.  Liberal  construction  finds  contract  binding 
on  rates. — Where,  however,  a  more  liberal  construc- 
tion is  given  of  the  power  conferred  upon  the  munici- 
pality to  regulate  the  service,  a  number  of  jurisdic- 
tions hold  that  where  the  municipal  public  utility 
accepts  and  acts  upon  an  ordinance  permitting  it  to 
install  its  plant  and  furnish  its  service  a  contract  is 
entered  into  which  is  binding  upon  both  parties  with 
reference  to  the  rates  fixed  by  its  terms  as  well  as  to 
the  other  items  of  the  contract,  for  as  the  court  in  the 
case  of  Cleveland  v.  Cleveland  City  R.  Co.,  194  U.  S. 
517,  48  L.  ed.  1102,  decided  in  1904,  says:  "The  ques- 
tion for  decision,  then,  is,  did  the  consolidated  ordi- 
nance of  February,  1885,  and  the  ordinance  thereafter 
passed  and  accepted,  already  referred  to,  constitute 
binding  contracts  in  respect  to  the  rates  of  fare  to  be 
thereafter  exacted  upon  the  consolidated  and  extended 
lines  of  the  complainant?  That  in  the  courts  of  Ohio 
the  acceptance  of  an  ordinance  of  the  character  of 
those  just  referred  to  is  deemed  to  create  a  binding 
contract  is  settled.  ...  In  reason,  the  conclusion 
that  contracts  were  engendered  would  seem  to  result 
from  the  fact  that  the  provisions  as  to  rates  of  fare 
were  fixed  in  ordinances  for  a  stated  time  and  no 
reservation  was  made  of  a  right  to  alter;  that  by  those 


§  520  PUBLIC   UTILITIES.  59O 

ordinances  existing  rights  of  the  corporations  were 
surrendered,  benefits  were  conferred  upon  the  pubHc, 
and  obligations  were  imposed  upon  the  corporations 
to  continue  those  benefits  during  the  stipulated  time." 

§  520.  Delegated  power  to  fix  rates  by  contract 
or  franchise  limited  thereby. — Where  the  authority  to 
regulate  the  service  and  fix  the  rates  to  be  charged 
for  it  is  conferred  on  the  municipality  with  a  provision 
that  the  rates  shall  be  fixed  by  contract  or  in  the  fran- 
chise, the  municipality  which  makes  a  contract  for 
such  service  or  grants  a  franchise  permitting  the  mu- 
nicipal public  utility  to  install  its  plant  and  furnish  its 
service  without  fixing  the  rates  to  be  charged,  may  not 
thereafter  by  ordinance  regulate  the  rates,  for  as  the 
court  in  the  case  of  Richmond  v.  Richmond  Natural 
Gas  Co.,  168  Ind.  82,  79  N.  E.  103 1,  decided  in  1907, 
says:  "Where  a  franchise  to  supply  gas  is  granted 
without  restriction  as  to  prices,  accepted,  and  acted 
upon,  cities  incorporated  under  the  general  law  of 
this  state  had  no  authority  prior  to  1905  by  subsequent 
ordinance  or  action,  to  impose  additional  provisions 
regulating  prices  to  be  charged  for  gas  furnished 
under  the  original  franchise.  .  .  .  The  general  as- 
sembly of  1905,  in  revising  the  statutes  governing 
cities  and  towns,  conferred  upon  cities  the  following 
among  other  powers:  '(36)  To  license  and  regulate 
the  supply,  distribution  and  consumption  of  artificial 
and  natural  gas,  electricity,  heat  and  water,  and  to  fix 
by  contract  or  franchise  the  prices  thereof,'  etc.  .  .  . 
The  statute  relied  upon  purports  to  empower  a  city 
of  the  class  to  which  appellant  belongs  to  fix  prices 
only  *by  contract  or  franchise.'  When  the  manner 
in  which  a  delegated  power  is  to  be  exercised  is  pre- 
scribed, it  must  be  substantially  followed.  .  .  .  The 
ordinance  under  consideration  is  without  any  of  these 


591  MUNICIPAL   REGULATION.  §  521 

characteristics.  It  neither  grants  a  new  right,  nor 
confirms  or  extends  an  existing  one,  but  merely  seeks 
to  impose  special  restrictions  upon  an  existing  right 
to  the  use  of  the  streets  and  alleys  of  the  city.  .  .  . 
In  the  absence  of  charter  authority  or  other  statutory 
or  constitutional  provisions,  delegating  the  power  in 
express  terms  or  by  necessary  implication,  it  is  the 
rule  that  a  municipal  corporation  has  no  power  to  fix 
by  ordinance  the  price  at  which  a  gas  company  shall 
supply  its  customers.  20  Cyc.  1166,  and  cases  there 
cited.  In  this  case  it  appears  that  the  attempted  reg- 
ulation of  prices  was  not  done  by  contract,  or  in  con- 
nection with  the  granting  or  acceptance  of  a  franchise, 
and  the  legislature  has  not  delegated  to  appellant, 
whatever  authority  to  regulate  prices  of  gas  it  may 
possess  in  the  premises,  to  be  exercised  in  any  other 
manner." 

§  521.  Contract  giving  consent  and  fixing  rates 
valid. — Many  cases  sustain  the  right  of  the  city  to 
stipulate,  as  a  condition  of  the  granting  of  its  consent 
to  the  municipal  public  utility  instaling  its  plant  and 
rendering  its  service,  where  such  consent  is  made  nec- 
essary by  statutory  provisions,  a  specific  rate  which 
may  not  be  exceeded  for  the  service  to  be  furnished 
by  the  municipal  public  utility,  which  after  accepting 
the  grant  of  the  consent  by  the  city  on  such  condition 
is  thereby  precluded  from  charging  rates  in  excess  of 
those  so  fixed,  for  as  the  court  in  the  case  of  Boerth 
v.  Detroit  City  Gas  Co.,  152  Mich.  654,  116  N.  W. 
628,  18  L.  R.  A.  (N.  S.)  1197,  decided  in  1908,  says: 
"The  city  may  refuse  to  grant  that  consent.  It  is 
clear,  too,  that  it  may  attach  conditions  to  its  consent. 
.  .  .  .  There  is  no  doubt  that  the  municipality  may 
determine  for  what  length  of  time  a  gas  company 
may   use   its   streets   for  carrying  gas.      It   had.   there- 


§  522  PUBLIC   UTILITIES.  592 

fore,  authority — an  authority  exercised  in  this  case — 
to  determine  that  the  gas  company  should  use  the 
streets  for  a  period  of  thirty  years  for  the  purpose 
of  supplying  its  inhabitants  with  gas.  ...  It  may 
be  said  then,  that,  in  order  to  safeguard  the  rights  of 
its  inhabitants  who  use  gas,  it  is  not  only  reasonable 
that  the  city  should  have  this  power  to  fix  rates,  but 
is  it  highly  expedient — indeed,  it  is  necessary — that  it 
should  possess  that  power.  .  .  .  The  power  to  pre- 
scribe rates  by  contract — and  that  is  the  power  which 
was  exercised  in  this  case — is  a  very  different  power 
from  the  legislative  power  regulating  rates." 

§  522.  Fixing  maximum  rates  permits  regulation 
as  to  reasonableness. — While  the  city  may  thus  protect 
itself  from  exorbitant  rates  by  fixing  the  maximum  to 
be  charged  in  the  franchise  granting  its  consent  to  the 
municipal  public  utility,  decisions  to  this  effect  have 
held  that  this  does  not  preclude  a  determination  as  to 
the  reasonableness  of  the  rate  fixed  and  its  reduction 
in  case  it  is  unreasonable  and  excessive,  for  as  the 
court  in  the  case  of  Moberly  v.  Richmond  Tel.  Co.,  31 
Ky.  L.  783,  103  S.  W.  714,  decided  in  1907,  says:  "The 
city  may  annex  any  lawful  condition  to  the  exercise 
of  the  franchise,  which  becomes  a  part  of  the  contract 
under  which  it  is  thenceforth  used.  And  we  think  it 
was  competent  for  the  city  to  provide,  as  a  condition 
of  the  franchise,  that  the  rates  to  citizens  should  not 
exceed  the  schedule  fixed  in  the  ordinance,  or  any 
future  ordinance." 

Such  provisions  are  regarded  as  precautions  in  the 
interest  of  the  public  and  only  as  a  means  for  securing 
adequate  service  at  reasonable  rates,  which  right  the 
courts  agree  should  always  be  available,  for  as  the 
court  in  the  case  of  Public  Service  Corp.  v.  American 
Lighting  Co.,  67  N.  J.   Eq.   122,   57  Atl.  482,  decided 


593  MUNICIPAL   REGULATION.  §  523 

in  1904,  says:  "The  fundamental  and  cardinal  prin- 
ciple being  that  all  corporations  enjoying  a  franchise 
of  this  character,  and  the  complete  or  partial  monop- 
oly resulting  therefrom,  are  bound  to  serve  the  public 
upon  reasonable  terms  and  upon  reasonable  rates,  so 
that  neither  the  public  is  at  the  mercy  of  the  corpora- 
tions enjoying  the  franchise  nor  are  the  corporations 
at  the  mercy  of  the  public.  Their  dealings  must  all 
be  subject  to  the  test  of  reasonableness  on  both  sides." 

§  523.  Fixing  rates  not  favored — Tends  to  create 
monopoly. — The  legal  principle  denying  the  munici- 
pality the  power  to  preclude  itself  from  regulating  the 
rate  to  be  charged  for  municipal  public  utility  service 
from  time  to  time  by  a  contract  to  that  effect  in  the 
absence  of  clear  authority  conferred  upon  it  by  the 
state,  and  the  attitude  of  the  courts  in  construing 
strictly  the  grant  of  such  authority  and  the  provisions 
of  such  a  contract  with  reference  to  the  question  of 
rates  has  been  the  one  generally  accepted  by  the  courts 
for  many  years,  for  as  the  court  in  the  case  of  Illinois 
Trust  &  Sav.  Bank  v.  Arkansas  City  Water  Co.,  6y 
Fed.  196,  decided  in  1895,  says:  "The  right  to  furnish 
water  for  public  and  domestic  use  within  a  city  is  a 
public  service,  and  of  such  high  consequence  to  the 
public  that  it  should  at  all  times  remain  open  to  the 
control  of  the  city  council  for  the  benefit  of  the  public. 
The  contract  here  insisted  upon  would  place  the  mat- 
ter beyond  control  of  the  council  for  a  long  period  of 
time.  This  is  in  the  nature  of  an  attempt  to  create 
a  monopoly — a  power  which  the  city  council  never 
possesses,  unless  it  is  delegated  in  clear,  unmistakable 
terms." 


38— Pub.  ut. 


CHAPTER  XXVL 

REASONABLE  REGULATIONS. 

Section. 

524.  Municipal  control  and  rental  charges. 

525.  Concentration  of  service  lines  and  poles. 

526.  Police  regulations  for  underground  conduits. 

527.  Regulation  of  installation  and  supply  of  equipment. 

528.  Meter  and  equipment  provided   with   service. 

529.  Expense  of  meter  and  connections  met  by  customer,  not  by 

municipality. 

530.  Franchise  provisions  controlling  if  express  and  consistent. 

531.  Meter  as  a  measure  prevents  waste. 

532.  Meter  rental  included  in  price  fixed  for  service. 

533.  Customer  entitled  to  have  service  accurately  measured. 

534.  Municipality  may  tax  meter  rental  to  customer. 

535.  Customers  rather  than  taxpayers  pay  meter  rentals. 

536.  Connections  with  premises  included  in  rate  charge. 

537.  Service  connections  integral  part  of  equipment. 

538.  Connections  at  expense   of  customer  under  municipal   owner- 

ship. 

539.  Liability  for  meter,   etc.,   determined   by  provisions   and  con- 

struction  of  franchise. 

540.  Special  assesment   of  abutting  property — Unearned  increment. 

541.  Municipality  obliged  to  preserve  streets  for  travel. 

542.  Police  power  to  regulate  use  of  street. 

543.  Party  line  telephones  may  be  prohibited. 

544.  Unreasonable  to  require  service  for  all. 

545.  Municipality   requiring   conduits   limited   to   reasonable   neces- 

sity. 

§  524.     Municipal   control   and   rental  charges. — In 

the  exercise  of  its  right  to  make  reasonable  regula- 
tions for  the  municipal  public  utility,  the  municipality 
is  permitted  to  control  the  manner  in  which  the  neces- 
sary equipment  of  such  a  system  is  installed  so  that 
it  will  not  unreasonably  obstruct  the  streets  and  other 
594 


595  REASONABLE  REGULATIONS.  §  525 

public  places  of  the  municipality  nor  interfere  with  the 
operation  of  its  fire  department  nor  obstruct  the  en- 
joyment by  its  inhabitants  of  their  right  to  light,  air 
and  access  to  their  places  of  business  or  residences  any 
more  than  is  necessary  for  the  proper  installation  of 
the  particular  system  of  any  municipal  public  utility. 
In  the  exercise  of  its  police  power  and  of  its  control 
over  the  streets  and  other  public  places  as  well  as  of 
its  statutory  rights  conferred  upon  it  by  the  state  or 
expressly  reserved  in  its  ordinances  as  conditions  upon 
which  it  gave  its  consent  to  the  use  of  its  streets  by 
the  municipal  public  utility,  the  municipal  corporation 
has  the  power  to  fix  the  location  and  control  the  man- 
ner of  the  installation  by  the  municipal  public  utility 
of  its  equipment  and  to  require  the  payment  of  a  rea- 
sonable charge  in  the  nature  of  a  rental  for  the  exclu- 
sive use  of  those  parts  of  the  street  occupied  by  its 
poles,  wires  and  other  equipment  or  the  payment  of 
a  special  tax  in  the  nature  of  a  license  fee  for  the  erec- 
tion and  maintenance  throughout  the  streets  or  the 
municipality  of  the  necessary  equipment  to  render 
municipal  public  utility  service. 

§  525.     Concentration  of  service  lines  and  poles. — 

The  municipality  may  also  require  that  its  own  wires 
and  other  equipment  necessary  to  the  operation  of  its 
fire,  police  and  other  departments  be  accommodated 
by  the  poles  and  conduits  belonging  to  the  equipment 
of  the  municipal  public  utility  as  a  condition  of  the 
granting  to  it  of  the  franchise  rights  permitting  it  to 
maintain  and  operate  its  system  and  furnish  its  service. 
Indeed,  the  municipality  may  require  that  the  same 
equipment  of  poles  and  conduits  be  used  by  all  similar 
municipal  public  utilities  on  reasonable  compensation 
being  paid  for  them  so  far  as  their  use  by  another 
company  does  not  actually  interfere  with  or  interrupt 


§  526  PUBLIC    UTILITIES.  596 

the    service   rendered   by   the    municipal    public   utility 
which  installed  the  equipment  for  its  own  use. 

§  526.  Police  regulations  for  underground  con- 
duits.— Such  a  requirement  comes  within  the  proper 
exercise  of  the  police  power  in  preventing  the  useless 
duplication  of  equipment  and  the  undue  interference 
with  the  operation  of  the  municipal  fire  department 
and  the  unnecessary  obstruction  of  the  view  and  inter- 
ference with  the  right  to  light  and  access  of  the  indi- 
vidual citizen  and  property  owner,  and  for  the  same 
reason  the  municipality  may  require  the  municipal 
public  utility  to  remove  its  overhead  wires  and  place 
them  in  conduits  beneath  the  surface.  As  the  duty 
devolves  on  the  municipality  of  regulating  and  con- 
trolling the  streets  in  trust  for  the  public,  it  can  not 
devote  them  to  any  other  inconsistent  use,  such  as  the 
erection  in  them  of  municipal  buildings  or  other  prop- 
erty of  the  municipality. 

§  527.  Regulation  of  installation  and  supply  of 
equipment. — In  the  exercise  of  its  police  power  and 
in  the  performance  of  its  duty  to  maintain  the  streets 
for  the  use  of  the  public  as  a  means  of  transportation 
and  communication,  for  which  they  were  originally 
dedicated  and  primarily  intended,  the  municipality 
may  require  the  municipal  public  utility  instaling  its 
tracks  and  other  equipment  necessary  to  operate  a 
street  car  system  to  lay  but  one  track  in  certain  por- 
tions of  a  street,  although  the  franchise  originally  per- 
mitted the  laying  of  a  double  track  where  its  terms 
were  modified  to  this  effect  within  a  reasonable  time 
after  the  franchise  was  adopted.  The  municipality 
may  also  provide  that  the  municipal  public  utility  in 
the  operation  of  its  street  car  system  may  not  attempt 
to  carry  more  than  a  certain  number  of  passengers  in 


597  REASONABLE    REGULATIONS.  §  528 

its  cars  and  that  sufficient  equipment  be  furnished  for 
the  accommodation  of  the  public  as  a  condition  of  the 
fundamental  requirement  that  the  public  be  served 
adequately  as  well  as  at  a  reasonable  rate. 

§  528.  Meter  and  equipment  provided  with  service. 
— Where  the  municipal  public  utility  is  required  to 
furnish  its  service  at  a  fixed  rate,  a  number  of  deci- 
sions have  held  that  it  must  provide  the  necessary 
meters  or  other  equipment  at  its  own  expense  for  the 
purpose  of  measuring  the  service  rendered,  although 
other  cases,  especially  where  the  municipality  is  fur- 
nishing the  municipal  public  utility  service,  have  held 
that  the  customer  may  be  required  to  pay  the  expense 
of  putting  in  the  service  pipes  and  a  reasonable  rental 
for  the  use  of  the  meter  which  not  only  measures  the 
service  rendered,  but  tends  to  prevent  the  extravagant 
use  or  needless  waste  of  the  service.  As  the  meter  is 
the  only  best  known  method  of  determining  the  amount 
of  service  the  customer  receives,  its  use  redounds  to 
his  own  advantage  over  the  payment  of  a  flat  rate  for 
the  service  by  which  the  careful  and  conservative  cus- 
tomer is  obliged  to  pay  the  same  as  the  extravagant 
and    careless    one. 

§  529.  Expense  of  meter  and  connections  met  by 
customer,  not  by  municipality. — In  case  the  munici- 
pality furnishes  the  municipal  public  utility  service 
the  meter  rental  as  well  as  the  expense  of  instaling  the 
service,  and  even  the  main  pipes,  is  perhaps  more 
equitably  imposed  upon  the  customer  or  the  abutting 
property  owner  who  receives  the  service  or  whose 
property  is  enhanced  by  the  fact  that  it  is  available 
rather  than  upon  the  taxpayer  or  all  the  inhabitants, 
some  of  whom  do  not  receive   the   service   nor  derive 


§  530  PUBLIC    UTILITIES.  598 

any  benefit  from  it  as  abutting  property  owners,  except 
that  as  citizens  they  are  at  least  indirectly  benefited 
from  the  public  water  supply  and  the  services  of  the 
fire  department  as  well  as  from  the  fact  that  the 
streets  and  public  places  of  the  city  are  lighted  as  a 
form  of  police  protection.  Although  each  inhabitant 
generally  has  the  right  to  contract  directly  for  munici- 
pal public  utility  service,  this  does  not  require  that  the 
municipal  public  utility  shall  install  as  many  individual 
service  pipes  for  any  structure  as  there  may  be  rooms 
or  tenants  occupying  but  one  or  two  rooms,  because 
the  expense  of  doing  so  would  make  the  requirement 
an  unreasonable  one  in  view  of  the  alternative  which 
is  equally  available  that  single  service  be  furnished  the 
structure  and  its  owner  distribute  the  expense  among 
his  tenants. 

§  530.  Franchise  provisions  controlling  if  express 
and  consistent. — Whether  the  expense  of  connecting 
the  premises  with  the  street  main  can  reasonably  be 
imposed  upon  the  consumer  is  determined  by  the  pro- 
visions of  the  franchise  or  the  terms  of  the  contract 
of  the  municipal  public  utility  providing  the  service, 
although  where  this  item  is  not  expressly  stipulated 
for  and  the  municipal  public  utility  undertakes  to  ren- 
der service  at  a  fixed  rate  it  is  generally  held  liable 
for  the  cost  of  instaling  all  the  equipment  necessary 
to  furnish  the  service  within  that  rate,  including  the 
service  pipes,  meters  and  the  Hke.  Where,  however, 
the  municipality  furnishes  the  municipal  public  utility 
service  or  the  ordinance  specifies  that  such  expenses 
as  meters  and  connecting  the  main  with  the  premises 
shall  be  borne  by  the  customer,  he  is  required  to  in- 
stall the  service  connections  and  such  equipment  and 
keep  them  in  repair  at  his  own  expense,  unless  this  is 


599  REASONABLE  REGULATIONS.  §  53a 

contrary  to  the  contract  or  inconsistent  with  statutory- 
regulations.^ 

1  ALABAMA.— Smith  v.  Birmingham  Waterworks  Co.,  104  Ala. 
315,  16  So.  123. 

CALIFORNIA.— Sheward  v.  Citizens'  Water  Co.,  90  Cal.  635; 
Smith  V.  Capital  Gas  Co.,  132  Cal.  209;  Spring  Valley  Water  Works 
V.  San  Francisco,  82  Cal.  286. 

FEDERAL.— Memphis  v.  Postal  Tel.  &  Cable  Co.,  164  Fed.  600; 
Minneapolis  General  E.  Co.  v.  Minneapolis,  194  Fed.  215;  Minneapolis 
St.  R.  Co.  V.  Minneapolis,  189  Fed.  445;  Pocatello  v.  Murry,  20& 
Fed.  72. 

IDAHO.— Bothwell  v.  Consumers'  Co.,  13  Idaho  568,  92  Pac.  533, 
24  L.  R.  A.   (N.  S.)  485. 

ILLINOIS. — Anderson  v.  Berwyn,  135  111.  App.  8;  Palmer  v.  Dan- 
ville, 154  111.  156,  38  N.  E.  1067;  Springfield  v.  Postal  Tel-Cable  Co., 
253  111.  346,  97  N.  E.  672;  Wagner  v.  Rock  Island,  146  111.  139,  34  N. 
E.  545.  21  L.  R.  A.  519. 

INDIANA.— Indiana  Natural  &  Illuminating  Gas  Co.  v.  State  ex 
rel.  Ball,  158  Ind.  516,  63  N.  E.  220,  57  L.  R.  A.  761;  Johnson  v.  State, 
113  Ind.  143.  15  N.  E.  215. 

IOWA.— Des  Moines  St.  R.  Co.  v.  Des  Moines  Broad-Guage  St. 
R.  Co.,  73  Iowa  513,  33  N.  W.  610;  Farmers'  Tel.  Co.  v.  Washta, 
—  Iowa  — ,  133  N.  W.  361. 

KANSAS.— Cooper  v.  Goodland,  80  Kans.  121,  102  Pac.  244,  23 
L.  R.  A.  (N.  S.)  410. 

KENTUCKY.— Capital  Gas  &  E.  L.  Co.  v.  Gaines,  20  Ky.  Law 
Rep.  1464,  49  S.  W.  462;  Louisville  v.  Louisville  Home  Tel.  Co.,  149 
Ky.  234,  148  S.  W.  13;  Louisville  Gas  Co.  v.  Dulaney,  100  Ky.  405, 
18  Ky.  L.  849,  38  S.  W.  703,  36  L.  R.  A.  125. 

MAINE.— Public  Works  Co.  v.  Old  Town,  102  Maine  306;  Rob- 
bins  V.  Bangor  R.  &  E.  Co.,  100  Maine  496. 

MARYLAND.— Blondell  v.  Consolidated  Gas  Co.,  89  Md.  732. 

MASSACHUSETTS.— Ladd  v.  Boston,  170  Mass.  322;  Postal  Tel. 
Cable  Co.  v.  Chicopee,  207  Mass.  341,  93  N.  E.  927;  Shaw  Stocking 
Co.  v.  Lowell,  199  Mass.  118,  85  N.  E.  90,  18  L.  R.  A.  (N.  S.)  746. 

MICHIGAN.— Detroit  v.  Ft.  W^ayne  &  B.  I.  R.  Co.,  95  Mich.  456. 
54  N.  W.  958,  20  L.  R.  A.  79;  Detroit  Gas  Co.  v.  Moreton  Truck  & 
Storage  Co.,  Ill  Mich.  401;  Goebel  v.  Grosse  Pointe  Waterworks, 
126  Mich.  307;  Kelsey  v.  Board  of  Fire  &  Water  Comrs.,  113  Mich. 
215,  71  N.  W.  589,  37  L.  R.  A.  675;  Mclllhinney  v.  Trenton,  148  Mich. 
380,  111  N.  W.  1083;  Monroe  v.  Detroit,  M.  &  T.  Short  Line  R.  Co., 
143  Mich.  315,  106  N.  W.  704. 

MINNESOTA.— Northwestern  Tel.  Exch.  Co.  v.  Minneapolis,  81 
Minn.  140,  S3  N.  W.  527,  86  N.  W.  69,  53  L.  R.  A.  175;  Powell  v. 
Duluth,  91  Minn.  53;  State  ex  rel.  City  of  St.  Paul  v.  St.  Paul  City 
Ry.  Co.   (Minn.),  142  N.  W.  136. 


§  53 1  PUBLIC   UTILITIES.  6oO 

§  531.     Meter  as  a  measure  prevents  waste. — The 

municipal  public  utility  being  engaged  in  business  of 
a  public  nature  in  return  for  the  special  privileges 
granted  it  is  bound  to  serve  any  member  of  the  public 
who   makes   proper   application   for   service   in   accord- 

MISSOURI.— Fisher  v.  St.  Joseph  Water  Co.,  151  Mo.  530,  132  S. 
W.  288;  Laclede  Gas  Light  Co.  v.  Gas  Consumers'  Assn.,  127  Mo.  App. 
442;  St.  Louis  Brewing  Assn.  v.  St.  Louis,  140  Mo.  419,  37  S.  W.  525, 
41  S.  W.  911;  Southern  Iron  Co.  v.  Laclede  Power  Co.,  109  Mo.  App. 
353;  State  v.  Sedalia  Gas  Light  Co.,  34  Mo.  App.  501;  State  ex  rel. 
St.  Louis  Underground  Service  Co.  v.  Murphy,  134  Mo.  548,  31  S.  W. 
784,  34  L.  R.  A.  369,  56  Am.  St.  515;  Joplin  v.  Wheeler  (Mo.),  158 
S.  W.  924. 

NEBRASKA.— Hoover  v.  Deffenbaugh,  83  Nebr.  476,  119  N.  W. 
1130. 

NEW  JERSEY.— Bridgeton  v.  Bridgeton  &  M.  Traction  Co.,  62 
N.  J.  L.  592,  43  Atl.  715,  45  L.  R.  A.  837;  Doughten  v.  Camden,  72  N. 
J.  L.  451,  63  Atl.  170,  3  L.  R.  A.  (N.  S.)  817. 

NEW  YORK.— Alvord  v.  Syracuse,  163  N.  Y.  158,  57  N.  E.  310; 
Buffalo  V.  Buffalo  Gas  Co.,  80  N.  Y.  S.  1093,  81  App.  Div.  505;  For- 
tescue  V.  Kings  County  Lighting  Co.,  128  App.  Div.  826;  New  York 
&  Q.  E.  L.  &  P.  Co.  V.  Long  Island  Mach.  &c..  Const.  Co.,  123  App. 
Div.  552;  People  v.  Barnard,  110  N.  Y.  548,  18  N.  E.  354;  Swanberg 
V.  New  York  City,  123  App.  Div.  774;  People  ex  rel.  New  York  Elec- 
tric lines  Co.  v.  Ellison,  188  N.  Y.  523,  81  N.  E.  447. 

NEW  MEXICO.— Colorado  Tel.  Co.  v.  Fields,  15  N.  Mex.  431,  110 
Pac.  571,  30  L.  R.  A.  (N.  S.)  1088. 

NORTH  CAROLINA.— Griffin  v.  Goldsboro  Water  Co.,  122  N. 
Car.  206,  30  S.  E.  319,  41  L.  R.  A.  240. 

NORTH  DAKOTA.— Jackson  v.  Ellendale,  4  N.  Dak.  478,  61 
N.  W.  1030. 

OHIO.— State  v.  Columbus  Gas  Light  &  Coke  Co.,  34  Ohio  St.  573. 

SOUTH  CAROLINA.— Charleston  L.  &  P.  Co.  v.  Lloyd  Laundry 
Co.,  81  S.  Car.  475. 

TEXAS.— International  Water  Co.  v.  El  Paso,  51  Tex.  Civ.  App. 
321,  112  S.  W.  816. 

UNITED  STATES.— Baltimore  v.  Baltimore  Trust  &  G.  Co.,  166 
U.  S.  673,  41  L.  ed.  1160;  Postal  Tel-Cable  Co.  v.  Taylor,  192  U.  S. 
64,  48  L.  ed.  342;  St.  Louis  v.  Western  Union  Tel.  Co.,  149  U.  S.  465, 
37  L.  ed.  810;  Western  Union  Tel.  Co.  v.  Richmond,  224  U.  S.  160, 
56  L.  ed.  710;  Grand  Trunk  W.  R.  Co.  v.  South  Bend,  227  U.  S. 
544,  57  L.  ed.  — . 

VIRGINIA.— Exchange  &  B.  Co.  v.  Roanoke  Gas  &  Water  Co., 
90  Va.  83;  Roanoke  Gas  Co.  v.  Roanoke,  88  Va.  810,  14  S.  E.  665. 

WASHINGTON.— Cleveland    v.     Maiden    Waterworks    Co.,    69 


6oi  REASONABLE   REGULATIONS.  §  53^ 

ance  with  reasonable  rules  and  regulations.  The 
meter  is  the  most  efficient  method  yet  devised  for 
accurately  measuring  the  quantity  of  such  municipal 
public  utility  service  as  gas,  water  and  electricity. 
The  meter  also  prevents  the  extravagant  use  or  need- 
less waste  of  such  service  which  frequently  occurs 
where  the  flat  rate  is  the  method  employed  for  deter- 
mining the  amount  due  for  the  service.  Because  the 
meter  is  a  useful,  if  not  indeed  an  essential  part  of 
the  municipal  public  utility  equipment,  the  company 
may  be  required  to  furnish  it  at  its  own  expense,  and 
where  this  is  expressly  stipulated  or  where  a  maxi- 
mum charge  for  the  service  is  fixed,  the  courts  have 
held  that  the  company  may  not  collect  a  rental  for 
the  use  of  its  meters  in  addition  to  the  maximum  rate 
allowed  it  for  the  service,  for  as  the  court  in  the  case 
of  Buffalo  V.  Buffalo  Gas  Co.,  80  N.  Y.  S.  1093,  de- 
cided in  1903,  says:  "Not  only  is  the  consumer  en- 
titled to  be  protected  against  imposition  by  some  safe 
method  of  measuring  the  quantity  which  he  uses,  but 
it  is  essential  and  necessary  for  the  gas  company 
itself  that  such  measurement  and  test  should  be  accu- 
rate. Having  in  mind  these  facts,  the  law  in  question 
in  effect  provides  that  the  consumer  shall  be  supplied 
with  a  meter,  and  that  the  same  shall  not  only  be 
furnished  by  the  company  without  charge,  but  that 
it  shall  be  inspected  by  officials  designated  for  that 
purpose.  The  object  of  these  provisions  is  very  plain. 
They   contemplate   that   the   gas   company  desiring  to 

Wash.  541,  125  Pac.  769;  Smith  v.  Seattle,  25  Wash.  300,  165  Pac. 
612;  State  ex  rel.  Hallett  v.  Seattle  Lighting  Co.,  60  Wash.  81,  110 
Pac.  799.  30  L.  R.  A.   (N.  S.)  492. 

WEST  VIRGINIA.— State  ex  rel.  McClaugherty  v.  Bluefleld,  W. 
&  I.  Co.,  67  W.  Va.  285,  68  S.  E.  28,  32  L.  R.  A.  (N.  S.)  229. 

WISCONSIN.— Gleason  v.  Waukesha  County,  103  Wis.  225,  79 
N.  W.  249;  State  ex  rel.  Hallauer  v.  Gosnell,  116  Wis.  606.  93  N.  W. 
542,  61  L.  R.  A.  33;  Washburn  Waterworks  Co.  v.  Washburn,  129  Wis. 
73,  108  N.  W.  194. 


§  532  PUBLIC    UTILITIES.  602 

engage  in  such  business  shall  not  take  advantage  of 
its  customers,  either  by  supplying  an  untrue  meter 
or  by  making  them  pay  for  the  ordinary  method  of 
determining  what  has  been  consumed.  We  think  such 
provisions  are  clearly  within  the  power  conferred  upon 
the  legislature  to  enact  those  laws  for  the  public  and 
general  welfare  which  are  ordinarily  known  as  police 
regulations." 

§  532.  Meter  rental  included  in  price  fixed  for 
service. — The  company  may  not  collect  a  rental  for 
the  use  of  its  meters  where  it  is  charging  the  maxi- 
mum rate  specified  for  its  service,  because  if  it  did  so 
it  would  exceed  the  amount  allowed  it  and  also  be- 
cause it  is  its  duty  in  connection  with  providing  its 
service  to  measure  the  amount  of  the  service  furnished 
and  render  a  statement  of  the  account  as  the  basis  of 
payment  for  the  customer,  for  as  the  court  in  the  case 
of  Louisville  Gas  Co.  v.  Dulaney,  100  Ky.  405,  18 
Ky.  Law  R.  849,  38  S.  W.  703,  36  L.  R.  A.  125,  de- 
cided in  1897,  says:  "While  the  consumer  may  cause 
it  to  be  inspected,  and  may  test  the  accuracy  of  its 
work,  his  concern  is  only  to  ascertain  and  pay  for 
what  gas  he  has  consumed,  and  he  can  not  be  called  on 
to  pay  for  the  apparatus  used  in  its  measurement,  any 
more  than  he  can  be  made  to  pay  for  the  machinery 
used  in  its  manufacture.  He  is  required  to  pay  the 
legal  rate  for  the  quantity  consumed,  and  this  quantity 
must  be  ascertained  by  the  company  by  some  correct 
method.  The  company  can  only  charge  for  the  quan- 
tity it  actually  furnishes,  and  to  ascertain  what  it  fur- 
nishes it  must  measure  it.  How,  the  consumer  does 
not  care,  so  it  is  measured  correctly.  The  appellees 
therefore  are  entitled  to  have  their  gas  furnished  to 
them  already  measured,  and  for  it,  so  measured,  they 
can  be  made  to  pay  at  the  price  of  $1.35  per  1,000 
feet,   and  no  more.     If   the   price   of   gas   were   unre- 


603  REASONABLE  REGULATIONS.  §  533 

stricted  in  the  organic  law  of  the  corporation,  the  rule 
charging  a  higher  price  to  small  consumers  might  be 
upheld." 

§  533-  Customer  entitled  to  have  service  accurate- 
ly measured. — The  courts  will  enjoin  the  municipal 
public  utility  from  discontinuing  its  service  on  the 
refusal  of  the  customer  to  pay  an  arbitrary  amount 
fixed  by  the  municipal  public  utility  without  accurately 
determining  the  amount  of  the  service  by  the  use  of 
the  meter,  for  as  the  court  in  the  case  of  Smith  v. 
Birmingham  Waterworks  Co.,  104  Ala.  315,  16  So. 
123,  decided  in  1894,  says:  "In  all  cases  where  the 
defendant  has  the  right  to  charge  for  water  by  meas- 
urement, and  demand  pay  for  water  furnished,  it  is 
incumbent  on  the  respondent  to  furnish  meters.  There 
is  no  authority  given  to  the  respondent  to  refuse  to 
furnish  meters,  and  fix  an  arbitrary  price,  where  water 
is  to  be  paid  for  by  measurement,  and,  unless  payment 
is  made  according  to  such  arbitrary  rate,  to  cut  off 
the  supply  of  water.  The  damage  in  such  a  case 
would  be  irreparable,  and  a  court  of  equity  would  not 
hesitate  to  interfere  by  injunction." 

§  534.  Municipality  may  tax  meter  rental  to  cus- 
tomer.— ^^■here,  however,  the  municipality  itself  is 
furnishing  the  municipal  public  utility  service,  it  may 
provide  that  the  expense  of  the  meter  shall  be  paid 
by  the  customer,  where  this  is  not  in  conflict  with  any 
regulation  by  the  state,  for  as  the  court  in  the  case 
of  Shaw  Stocking  Co.  v.  Lowell,  199  Mass.  118,  85 
N.  E.  90.  18  L.  R.  A.  (N.  S.)  746.  decided  in  1908, 
says:  "The  principal  object  of  the  defendant's  water 
board  in  requiring  fire-service  pipes  to  be  metered  is 
to  prevent  the  surreptitious  or  careless  withdrawal  of 
water  through  such  pipes  for  other  purposes  than  the 
extinguishment  of  fires;  another  object   is   to  procure 


§  535  PUBLIC    UTILITIES.  604 

the  measurement  by  meter  of  all  water  consumed  for 
any  purpose  in  order  to  check  wastage  and  to  require 
each  taker  to  pay  for  the  exact  quantity  of  water  fur- 
nished to  him.  The  requirement  is  well  adapted  to 
aid  in  accomplishing  these  objects;  and  this  is  none 
the  less  so,  although  its  operation  sometimes  may  be 
circumvented  by  some  fraudulent  device.  The  regu- 
lation must  be  regarded  as  reasonable,  unless  some  of 
the  plaintiff's  specific  objections  to  it  can  be  sus- 
tained." 

§  535-  Customers  rather  than  taxpayers  pay  meter 
rentals. — It  has  been  decided  that  the  customer  is  the 
proper  party  to  pay  for  the  meter  where  the  munici- 
pality furnishes  the  service  for  the  further  reason  that 
in  case  the  municipality  furnished  the  meters,  the 
expense  of  doing  so  would  be  met  by  all  the  tax- 
payers, some  of  whom  would  not  be  consumers  of  the 
service,  for  as  the  court  in  the  case  of  Cooper  v.  Good- 
land,  80  Kans.  121,  102  Pac.  244,  23  L.  R.  A.  (N.  S.) 
410,  decided  in  1909,  says :  "It  is  evident  that  the  only 
fair  basis  of  fixing  the  amount  which  the  individual 
customer  should  contribute  for  the  benefit  individually 
received  is  by  measuring  the  water  he  gets.  The 
water  meter  is  the  instrument  for  this  purpose,  and 
the  question  is  whether  it  is  reasonable  to  require 
each  consumer  of  water  to  pay  for  his  individual 
meter,  instead  of  all  the  taxpayers  of  the  city  paying 
for  all  the  meters  used.  As  is  commonly  the  case,  it 
may  be  in  Goodland  that  some  of  the  taxpayers  of 
the  city  are  not  so  located  that  they  can,  and  they 
do  not,  in  fact,  use  water  from  the  public  water-works. 
If  this  be  true,  it  seems  very  reasonable  that  they 
should  be  relieved  of  any  contribution  to  pay  for  the 
meters  of  those  who  do  use  the  water,  and  very  rea- 
sonable that  the  consumers  of   water  should  pay  for 


605  REASONABLE  REGULATIONS.  §  536 

the  meters  of  which  they  alone,  as  individuals,  get  the 
benefit." 

§  536.  Connections  with  premises  included  in  rate 
charge. — On  the  theory  that  the  duty  of  furnishing 
its  service  at  not  to  exceed  a  fixed  rate,  includes  the 
expense  necessary  completely  to  furnish  service,  the 
courts  have  held  that  in  the  absence  of  any  express 
stipulation  on  the  point,  the  expense  of  connecting 
the  premises  of  the  customer  with  the  municipal  pub- 
lic utility  system  must  be  borne  by  the  company  rather 
than  by  the  customer,  for  as  the  court  in  the  case  of 
International  Water  Co.  v.  El  Paso,  51  Tex.  Civ. 
App.  321,  112  S.  W.  816,  decided  in  1908,  says:  "The 
contract  nowhere  provides  that  the  consumer  shall  pay 
for  such  work,  but  the  only  basis  for  any  charge  to 
the  consumer  is  found  in  the  rate  fixed  by  said  pro- 
vision. We  think  the  failure  to  provide  that  the  con- 
sumer should  pay  said  rates,  and  also  the  cost  of 
making  the  connection  with  his  property,  rather  indi; 
cates  that  he  was  not  to  bear  the  cost  of  the  latter. 
However,  if  said  provision  be  taken  as  indicating  by 
inference  that  the  consumer  was  to  bear  such  cost, 
the  contract  in  other  respects  is  repugnant  to  giving 
it  that  construction.  Primarily,  the  duty  to  furnish 
water  to  property  owners  on  streets  containing  mains 
carried  with  it  the  duty  to  do  and  perform  what  was 
necessary  to  be  done  to  place  the  company  in  position 
to  furnish  the  property  with  water.  It  could  not  do 
this  without  connection  to  the  property  lines." 

§  537-  Service  connections  integral  part  of  equip- 
ment.— The  municipal  public  utility  should  install  the 
necessary  service  connections  at  its  own  expense  be- 
cause it  is  a  part  of  its  equipment  and  because  it  only 
has  the  right  to  the  use  of  the  streets  and  the  neces- 


§  53^  PUBLIC    UTILITIES.  6o6 

sary  control  over  its  equipment  to  make  the  connec- 
tions, for  as  the  court  in  the  case  of  Colorado  Tel. 
Co.  V.  Fields,  15  N.  Mex.  431,  no  Pac.  571,  30  L.  R. 
A.  (N.  S.)  1088,  decided  in  1910,  says:  "Appellant 
seems  to  justify  the  charges  for  installation  and  re- 
moval on  the  ground  that  they  are  made  in  pursuance 
of  a  reasonable  regulation  on  their  part.  We  can  not 
understand,  how^ever,  that  a  regulation  can  under  any 
circumstances  be  adopted  by  a  public  service  corpora- 
tion which  v^ill  result  in  increasing  a  rental  charge 
above  what  has  been  fixed  by  contract  as  a  maximum 
charge.  This  was  attempted  in  Johnson  v.  State,  113 
Ind.  143,  15  N.  E.  215,  and  it  was  held  to  be  invalid. 
And  the  obligation  to  furnish  telephone  service  at  not 
to  exceed  a  specified  rental  charge  certainly  must  in- 
clude the  installation  of  a  usable  appliance  connected 
with  a  system." 

§  538.  Connections  at  expense  of  customer  under 
municipal  ownership. — Where  the  service  is  being  ren- 
dered by  the  municipality,  however,  as  in  the  case  of 
the  installation  of  the  meter  the  expense  of  instal- 
ing  and  maintaining  the  service  pipe  or  other  equip- 
ment to  connect  the  premises  with  the  municipal  pub- 
lic utility  system  may  be  imposed  upon  the  customer 
as  a  reasonable  regulation  which  has  the  effect  of  re- 
ducing the  investment  in  the  municipal  public  utility 
plant  and  of  permitting  a  lower  rate  to  be  charged  for 
its  system  because  of  such  reduction  in  the  investment 
and  in  the  expense  of  maintenance  and  operation,  for 
as  the  court  in  Cleveland  v.  Maiden  Waterworks  Co., 
69  Wash.  541,  125  Pac.  769,  decided  August  20,  1912, 
says:  "If  the  company  only  lays  its  mains  in  the 
streets,  it  will,  as  a  matter  of  course,  have  less  money 
invested  than  if  it  carries  its  pipes  to  the  property 
line   of   each   individual   consumer,    and   will   be    com- 


607  REASONABLE   REGULATIONS.  §  539 

pelled  to  charge  less  in  the  former  case  than  in  the 
latter;  and,  if  there  be  no  contract  or  statutory  or 
municipal  regulation  in  the  way,  a  regulation  requir- 
ing the  property  owner  to  defray  the  expense  of  pip- 
ing and  conducting  the  water  from  the  main  to  his 
property  line,  and  in  addition  to  pay  a  reasonable 
monthly  charge  for  the  use  of  the  water,  would  not 
seem  unreasonable,  provided  the  two  charges  com- 
bined be  but  a  reasonable  charge  for  the  services  ren- 
dered. But  this  case  is  controlled  by  the  franchise 
ordinance,  which  requires  the  company  to  furnish 
water  to  users  and  consumers  at  certain  fixed  rates; 
and  we  are  of  opinion  that  it  is  not  so  furnished, 
within  the  meaning  of  the  ordinance,  unless  it  is  deliv- 
ered to  the  consumer  at  his  property  line." 

§  539.  Liability  for  meter,  etc.,  determined  by  pro- 
visions and  construction  of  franchise. — The  determi- 
nation as  to  which  party  shall  bear  these  expenses  is 
largely  a  question  of  the  construction  of  the  ordinance 
or  franchise  provision,  and  because  it  is  a  matter  of 
construction  and  the  language  used  in  different  cases 
varies,  the  cases  do  not  agree  in  requiring  the  com- 
pany or  the  customer  to  bear  the  expense,  each  of 
whom  derives  special  benefit,  for  as  the  court  in  the 
case  of  State  ex  rel.  Hallauer  v.  Gosnell,  ii6  Wis.  606, 
93  N.  W.  542,  61  L.  R.  A.  33,  decided  in  1903,  says: 
"It  is  a  matter  of  common  knowledge  that  the  use 
of  meters  has  a  double  purpose,  and  that  the  dominant 
one,  as  regards  the  party  furnishing  the  opportunity 
to  take  water,  is  to  prevent  useless  consumption  there- 
of. Secondary  to  that,  and  more  for  the  benefit  of 
the  consumer  than  the  party  responsible  for  keeping 
up  an  adequate  supply  of  water  under  proper  pressure, 
is  the  measurement  of  the  water.  The  consumer  is 
burdened  with  the  expense  of  providing  a  meter  and 


§  540  PUBLIC    UTILITIES.  6o8 

keeping  it  in  repair,  but  has  the  countervailing  advan- 
tage, by  the  exercise  of  prudence  in  the  use  of  the 
water,  of  paying  only  for  the  amount  actually  taken 
from  the  public  supply,  which,  in  most  cases,  by  rea- 
sonable attention,  can  be  made  much  less  than  what 
he  would  be  required  to  pay  by  the  schedule  of  rates 
where  meters  are  not  used.  .  .  .  The  whole  scheme 
of  the  charter  is  that  the  consumer  shall  bear  all  of 
the  expense  necessary  to  enable  him  to  take  water 
from  the  public  supply.  The  service  pipe,  laid  in  the 
street  from  its  connection  with  the  water  main  to  the 
curb  stop,  under  the  scheme  of  the  charter,  is  re- 
quired to  be  put  in  by  the  consumer  or  the  owner 
of  the  property  to  be  served." 

§  540.  Special  assessment  of  abutting  property — 
Unearned  increment. — Some  of  the  courts  have  per- 
mitted the  expense  of  instaling  the  necessary  equip- 
ment of  municipal  public  utilities  to  be  placed  upon 
the  abutting  property  owner  as  a  special  tax  for  the 
increased  value  thereby  given  the  land.  Indeed,  the 
doctrine  known  as  the  unearned  increment  theory  of 
taxation,  whereby  land  is  required  to  repay  in  part 
at  least  the  benefits  received  by  it  because  of  such 
improvements,  has  been  logically  and  forcefully  ap- 
plied, for  as  the  court  in  the  case  of  Gleason  v.  Wau- 
kesha County,  103  Wis.  225,  79  N.  W.  249,  decided 
in  1899,  says:  "It  is  generally  considered  that  prop- 
erty fronting  on  a  street  is  increased  in  value  by  the 
laying  of  water,  gas  and  sewer  pipes,  at  least  to  the 
extent  of  the  actual  cost  thereof,  and  municipal  regu- 
lations are  largely  based  on  that  theory,  and  are  uni- 
versally sustained  by  the  courts  so  far  as  the  burden 
imposed  upon  abutting  property  does  not  substantially 
exceed  the  benefits  thereto.  Such  improvements,  and 
the    incidental    duties    in    regard    to    them,    public    and 


6og  REASONABLE   REGULATIONS.  §  54I 

private,  are  classed  with  sidewalks  and  pavements. 
The  law  is  too  well  settled  on  this  subject  to  warrant 
any  extended  discussion  of  it  here." 

§  541.  Municipality  obliged  to  preserve  streets  for 
travel. — The  nature  of  the  tenure  of  the  municipality 
in  its  streets  and  of  its  duty  to  maintain  them  free  of 
obstructions  for  transportation  and  communication  of 
the  public  is  well  stated  by  the  court  in  the  case  of 
Mclllhinney  v.  Trenton,  148  Mich.  380,  iii  N.  W. 
1083,  decided  in  1907,  as  follows:  "Municipal  cor- 
porations, notwithstanding  their  broad  and  compre- 
hensive powers  have  no  right,  unless  authorized  by 
the  legislature,  to  alienate  their  streets  or  devote  them 
to  the  uses  inconsistent  with  the  rights  of  the  general 
public  and  the  abutting  landowners.  .  .  .  The 
municipality  holds  the  streets  and  power  to  regulate 
and  control  them  in  trust  for  the  public,  and  can  not 
put  them  to  any  use  inconsistent  with  street  purposes. 
Thus  cities  have  no  right  to  use  their  streets  for  the 
erection  of  municipal  buildings  or  works,  and  it  has 
been  held  that  placing  of  a  standpipe  in  a  public 
street,  the  fee  of  which  was  in  the  municipality,  was 
an  unlawful  use  of  the  street." 

§  542.     Police   power   to   regulate   use   of   street. — 

The  extent  of  the  police  power  as  authority  for  the 
municipality  in  changing  the  grade  or  otherwise  im- 
proving its  streets  in  the  interest  of  the  public  to 
require  municipal  public  utilities  to  remove  or  relocate 
their  equipment  at  their  own  expense  is  indicated  in 
the  decision  of  Roanoke  Gas  Co.  v.  Roanoke,  88  Va. 
810,  14  S.  E.  665,  decided  in  1892,  where  the  court 
says:  "Thus,  in  express  terms,  the  legislature  con- 
ferred upon  the  corporate  authorities  of  the  city  of 
Roanoke  the  most  ample  powers  to  grade  and  other- 
39— Pub.  ut. 


§  543  PUBLIC    UTILITIES.  6lO 

wise  improve  its  streets,  from  time  to  time,  as  in  its 
judgment  and  discretion  was  required  for  the  safety 
and  convenience  of  the  public.  The  powers  thus  dele- 
gated are  continuing  and  inalienable.  It  is  therefore 
undeniable  that,  though  a  city  may  have  agreed  for 
a  valuable  consideration  to  allow  a  company  to  lay 
gas  or  water  pipes  in  its  streets,  yet  if,  in  the  exercise 
of  its  authority  to  lower  the  grade  of  and  to  remove 
obstructions  from  its  streets,  the  pipes  should  become 
exposed,  so  as  to  obstruct  the  public  in  the  safe  and 
convenient  passage  along  them,  the  municipal  author- 
ities may  of  right  either  require  such  company  to 
remove,  or  they,  by  their  servants,  may  remove,  them 
as  obstructions  and  nuisances." 

§  543.     Party   line   telephones   may   be   prohibited. 

— ^That  a  condition  of  the  franchise  prohibiting  party 
line  telephone  service  is  valid,  and  a  reasonable  reg- 
ulation is  indicated  by  the  case  of  Louisville  v.  Louis- 
ville Home  Tel.  Co.,  149  Ky.  234,  148  S.  W.  13,  decided 
June  21,  1912,  where  the  court  says:  "In  the  instant 
case  the  language  of  the  ordinance,  under  which  ap- 
pellee acquired  its  franchise,  expressly  declares  in 
plain,  unambiguous  terms  that  'there  shall  be  no  party 
lines  constructed  or  maintained  by  the  owner  or  com- 
pany operating  such  telephone  system  or  plant.'  .  .  . 
The  condition  is  therefore  a  part  of  its  contract  with 
the  city;  and  if  the  city  insists  upon  its  compliance 
with  that  condition  appellee  can  be  compelled  by  the 
courts  to  do  so,  even  if  the  result  should  be  the  loss 
to  it  of  the  profits  it  has  been  accustomed  to  realize 
from  its  business." 

§  544.     Unreasonable  to  require   service  for  all. — 

That  an  ordinance  requiring  every  municipal  public 
utility  to  furnish  electrical  service  to  any  citizen  within 


f 


6ll  REASONABLE   REGULATIONS.  §545 

the  city  on  demand,  regardless  of  his  location,  is  un- 
reasonable, is  the  effect  of  the  decision  in  Minneapolis 
General  E.  Co.  v.  Minneapolis,  194  Fed.  215,  decided 
in  191 1,  for  as  the  court  says:  "There  is  nothing  in 
that  section  of  the  ordinance  or  in  any  other  part  of  the 
ordinance,  which  limits  the  operation  of  the  first  sec- 
tion to  those  parts  of  the  city  to  which  the  conduits  or 
lines  of  the  company  are  now  extended.  It  appears 
that  there  are  large  districts  in  the  city  where  these 
conduits  do  not  reach,  and  that  they  are  sparsely 
populated  districts.  If  that  section  is  to  be  given  its 
plain  meaning,  it  indicates  that  any  person  in  the 
extreme  borders  of  the  city  can  make  a  demand  upon 
the  company  for  installation  of  its  service,  although 
he  may  be  miles  from  any  conduit  or  line.  It  would 
then  be  its  duty  to  obtain  an  order  from  the  city  coun- 
cil to  extend  its  lines  to  that  section,  and  the  com- 
pany would  be  compelled  to  comply  with  this  demand 
under  the   penalty  provided  by  the  ordinance." 

§  545.  Municipality  requiring  conduits  limited  to 
reasonable  necessity. — The  limitation  of  reasonable- 
ness placed  on  the  right  of  the  municipality  to  exercise 
its  police  power  in  the  regulation  of  its  municipal 
public  utilities  is  well  illustrated  in  the  case  of  North- 
western Tel.  Exch.  Co.  v.  Minneapolis,  81  ]\Iinn.  140, 
83  N.  W.  527,  86  N.  W.  69,  53  L.  R.  A.  175,  decided 
in  1900,  where  the  court  refused  to  sustain  the  re- 
quirement of  the  municipality  that  all  telephone  wires 
be  placed  underground  in  conduits,  for  this  was  un- 
necessary and  an  unreasonable  requirement  in  the 
sparsely  settled  suburban  districts  of  the  city.  As  the 
court  expressed  it :  "The  addition  of  ten  times  the 
area  through  which  underground  conduits  must  be 
constructed  at  an  enormous  additional  expense,  with- 
out necessity,  is  violative  of  the  contract  entered  into 


§  545  PUBLIC    UTILITIES.  6l2 

between  the  city  and  the  plaintiff  in  the  ordinance 
under  which  the  system  was  estabHshed.  The  require- 
ments imposed  by  the  later  ordinance  upon  the  com- 
pany to  build  such  conduits  through  ungraded  streets 
in  suburban  parts  of  the  city  and  in  the  open  country, 
is  clearly,  upon  its  face,  unreasonable,  and  the  claim 
to  exercise  such  right  on  the  part  of  the  common 
council  of  the  city  at  their  'will  and  mere  motion' 
can  not  be  sustained  in  the  reasonable  exercise  of  the 
police  power,  or  upon  any  theory  that  is  consistent 
with  the  acquired  and  vested  rights  which  the  plaintiff 
enjoys  under  the  constitution  and  the  laws.  .  .  . 
In  a  proper  case,  where  the  city  exercises  its  power 
of  control  in  the  regulation  of  the  use  of  the  streets 
by  the  plaintiff,  based  upon  necessity  and  the  interests 
of  the  public,  that  power  will  be  sustained.  Beyond 
that  limit  it  can  not  go.  ...  A  city  has  the  right 
to  enact  reasonable  ordinances,  and  to  enforce  them; 
but  it  is  the  conservator,  not  the  autocrat,  of  the 
police  power.  .  .  .  It  is  not  to  be  doubted  that  the 
city  council  has  the  plenary  power  to  extend  the  sub- 
surface district  wherever,  in  the  exercise  of  a  fair  dis- 
cretion, it  decides  that  public  interests  require  it  to 
be  done." 


CHAPTER  XXVII. 

REGULATIONS    FOR    RENDERING    TELE- 
PHONE SERVICE. 

Sectiox. 

546.  Facts  peculiar  to  telephone  service. 

547.  Competition  extravagant  and  ineffective  regulation. 

548.  Expense  of  duplication  carried  by  customer  and  indefensible. 

549.  Competition  in  telephone  service  peculiarly  undesirable. 

550.  Efficient   public    regulation   of   telephone   especially    necessary. 

551.  Requirements  for  physical  connection  of  telephone  plants. 

552.  Contracts  restricting  service  in  restraint  of  trade. 

553.  Contract  for  connected  or  through  service. 

554.  Physical  connection  only  by  contract  or  state  requirement. 

555.  Cost   and    value    of   telephone    service    with    increase    of    sub- 

scribers. 

556.  Classification  of  telephone  service. 

557.  Physical   connection   by  constitutional  provision. 

558.  Statutory  and  constitutional  requirements  upheld. 

559.  Physical  connection  by  contract  available  to  all  alike. 

560.  Through  telephone  service  peculiarly  necessary. 

561.  Undertaking    to    furnish    connected    service    becomes    general. 

562.  Holding   out   consolidated   service   establishes   it   permanently. 

563.  Exclusive  contract  for  through  service  upheld  from  necessity. 

564.  Necessity  for  exclusive  service  question  of  fact. 

565.  Common-law   and   statutory   regulations   distinguished. 

566.  Public  and  private  business  distinguished. 

567.  Necessity  for  state  regulation  to  insure  public  complete  service. 

568.  Service  of  common  carrier  and  telephone  distinguished. 

569.  Doctrine  of  increasing  cost  of  service  peculiar  to  telephone. 

570.  Value  of  service  increases  with  its  amount. 

571.  No  discrimination  in  rates  nor  limitation  of  service. 

§  546.  Facts  peculiar  to  telephone  service. — The 
furnishing  of  telephone  service  may  be  distinguished 
from  providing  that  of  any  other  municipal  public 
utility,  and  by  virtue  of  this  fact  it  is  governed  by 
laws,  some'  of  which  are  peculiar  to  itself.  A  cus- 
613 


§  547  PUBLIC    UTILITIES.  614 

tomer  of  a  municipal  public  utility  providing  water, 
gas,  light,  heat  or  power  may  as  a  general  rule  be 
furnished  with  adequate  and  complete  service  by  the 
particular  municipal  public  utility  with  which  he  con- 
tracts, although  there  may  be  a  duplication  of  such 
service  available  by  the  existence  of  another  similar 
municipal  public  utility  rendering  the  same  kind  of 
service  alongside  and  parallel  with  the  competing 
company  with  which  the  particular  customer  has  con- 
tracted for  his  service.  In  the  case  of  the  municipal 
public  utility  furnishing  telephone  service,  however, 
in  a  field  where  a  competing  company  is  also  provid- 
ing such  service,  neither  company  alone  and  inde- 
pendent of  the  other  can  furnish  adequate  or  complete 
service  unless,  which  practically  never  occurs,  both 
companies  have  identically  the  same  list  of  customers, 
except  where  the  competing  companies  make  physical 
connection  of  their  equipment  by  the  use  of  a  common 
switchboard,  which  gives  and  receives  messages  from 
all  customers  of  either  company. 

§  547.  Competition  extravagant  and  ineffective 
regulation. — The  universal  objection  to  competition  of 
municipal  public  utility  systems  is  the  economic  one  of 
the  unnecessary  duplication  of  the  investment  and  the 
expense  of  maintenance  and  operation  of  two  parallel 
systems  where  one  could  render  adequate  service  at 
practically  one-half  the  cost  of  installation,  mainte- 
nance and  even  of  operation  in  at  least  some  cases 
where  the  cost  of  the  material  is  only  nominal;  as  for 
example,  the  furnishing  of  a  water  supply,  where  there 
is  practically  an  unlimited  free  source  of  supply  avail- 
able. Nor  is  this  economic  objection  overcome  or 
even  met  by  the  legal  theory  which  until  recently  pre- 
vailed as  the  sole  controlling  reason  for  the  supposed 
advantages  arising  from  competitive  conditions  as  the 


6l5  TELEPHONE   SERVICE.  §  548 

proper  means  of  regulating  the  service  rendered  or  the 
rate  charged  for  it,  for  it  is  now  very  generally- 
recognized  that  in  case  of  municipal  public  utilities 
which  are  natural  monopolies,  competition  is  at  once 
an  expensive  and  absolutely  ineffective  ultimate  method 
of  regulating  either  the  rates  or  the  service  of  the 
modern  municipal  public  utility. 

§  548.  Expense  of  duplication  carried  by  customer 
and  indefensible. — Indeed,  as  the  rates  received  from 
the  service  rendered  must  carry  the  investment  and 
meet  the  expense  of  furnishing  the  service,  it  inevita- 
bly follows  that  in  case  there  is  a  duplication  of  mu- 
nicipal public  utilities  rendering  similar  service  along 
parallel  lines  the  rate  must  be  materially  higher  in 
order  to  secure  the  same  return  on  the  investment  as 
in  the  case  where  a  single  municipal  public  utility 
furnishes  all  the  service.  Accordingly,  since  compe- 
tition ultimately  fails  to  control  the  service  rendered 
by  municipal  public  utilities,  because  they  are  natural 
monopolies,  and  as  it  inevitably  must  increase  rather 
than  decrease  the  rate  in  order  to  give  the  same  return 
upon  the  investment,  there  remains  neither  the  eco- 
nomic nor  the  legal  justification  for  a  duplication  in  the 
service  of  municipal  public  utilities.  As  the  force  of 
competition  is  no  longer  recognized  as  effective  in 
controlling  the  service  and  regulating  the  rates  of 
municipal  public  utilities,  the  authorities  agree  that 
the  necessity  for  public  regulation  and  control  is  abso- 
lute and  undisputed,  for  in  its  absence,  experience  and 
common  observation  have  too  often  indicated  for 
there  to  remain  room  to  doubt,  that  the  service  is  sub- 
jected to  all  the  charges  that  the  trafific  will  bear. 

§  549.  Competition  in  telephone  service  peculiarly 
undesirable. — For  all  these  reasons  as  well  as  for  the 


§  550  PUBLIC    UTILITIES.  6l6 

additional  one  before  suggested,  that  neither  of  the 
dupHcated  municipal  public  utility  systems  rendering 
telephone  service  can  in  the  very  nature  of  things 
render  service  that  is  either  adequate  or  complete, 
it  follows  that  competition  as  a  means  of  regulating 
telephone  service  or  controlling  its  rates  results  in 
more  inconvenience  and  expense  and  is  the  least  justi- 
fiable of  all  existing  forms  of  municipal  public  utihty 
service,  and  conversely  that  the  need  of  public  regu- 
lation and  control  by  impartial  experts  in  this  case  of 
the  telephone  is  greater  than  any  other. 

§  550.  Efficient  public  regulation  of  telephone  es- 
pecially necessary. — Intelligent  control  of  the  munici- 
pal public  utility  furnishing  telephone  service  by  the 
public  is  peculiarly  necessary  for  the  additional  reason 
that  this  business  is  the  most  complex  and  least  under- 
stood of  any  of  the  municipal  public  utilities,  and  the 
expectation  of  the  public  in  the  past  that  this  form  of 
municipal  public  utility  would  regulate  itself  and  take 
care  of  the  interests  of  the  public,  or  that  any  attempt 
on  the  part  of  the  public  without  the  assistance  of 
technical  unprejudiced  experts  of  the  subject  to  under- 
stand this  form  of  municipal  public  utility  business 
or  fairly  to  regulate  its  service  and  determine  the  rea- 
sonable rate  to  be  charged  for  it  must  inevitably  fail. 
The  many  failures  to  understand  and  fairly  regulate 
the  service  of  this  municipal  public  utility  without  the 
help  of  trained  experts  furnishes  the  best  argument 
and  the  most  convincing  illustration  that  the  question 
of  regulating  all  municipal  public  utilities  and  of  deter- 
mining what  is  a  reasonable  rate  to  be  charged  for 
their  service  can  only  be  fairly  and  satisfactorily  deter- 
mined by  an  administrative  body  or  commission  of 
unbiased  trained  experts. 


6l7  TELEPHONE   SERVICE.  §  55 1 

§  551.  Requirements  for  physical  connection  of 
telephone  plants. — The  fact  that,  where  there  is  a 
duplication  of  municipal  public  utilities  rendering  tele- 
phone service  in  the  same  locality,  neither  indepen- 
dently of  the  other  can  furnish  complete  service  has 
resulted  in  some  of  the  states  requiring  such  compa- 
nies to  make  physical  connection  of  their  plants  and 
to  serve  impartially  the  customers  of  either  municipal 
public  utility  by  the  installation  of  a  common  switch- 
board or  trunk  line  between  the  exchanges  of  the 
duplicating  companies  upon  payment  of  a  reasonable 
amount  to  be  fixed  by  assessment.  Decisions  in  other 
states,  where  this  requirement  is  not  made  by  virtue 
of  a  constitutional  provision  or  statutory  enactment, 
have  held  that  while  at  common  law  such  an  action 
can  not  be  required,  if  by  agreement  between  the  com- 
peting companies  such  a  connection  is  made,  the  ad- 
vantage resulting  from  the  connection  or  the  use  of  a 
common  switchboard  or  trunk  line  between  the  ex- 
changes of  the  different  municipal  public  utilities  be- 
comes available  to  all  the  members  of  the  public  who 
are  customers  of  telephone  service  on  the  theory  that 
the  agreement  of  the  municipal  public  utilities  in  mak- 
ing such  a  physical  connection  between  their  systems 
constitutes  a  declaration  of  their  intention  to  waive 
the  common-law  right  of  operating  their  plants  inde- 
pendently and  subjects  their  property  to  the  additional 
burden  of  serving  all  the  public  who  desire  telephone 
service. 

§  552.  Contracts  restricting  service  in  restraint  of 
trade. — This  doctrine  is  peculiar  to  municipal  public 
utilities  furnishing  telephone  service  which  makes 
their  control  all  the  more  complex,  and  while  the 
courts  have  held  that  the  state  may  require  such  mu- 
nicipal public  utilities  physically  to  connect  their  plants 


§  553  PUBLIC    UTILITIES.  6l8 

or  having  voluntarily  agreed  to  do  so  for  some  of 
their  customers  that  they  are  obliged  to  extend  the 
same  privilege  to  all,  the  decisions  are  not  agreed  as 
to  the  extent  of  the  obligation  assumed  by  the  com- 
panies in  making  such  an  agreement  nor  as  to  how 
far  it  becomes  available  to  other  similar  and  com- 
peting municipal  public  utilities  and  to  their  customers 
and  the  public  generally.  Some  of  the  courts  have 
upheld  an  agreement  by  a  municipal  public  utiHty 
rendering  only  local  service  to  furnish  all  of  its  long 
distance  service  to  a  particular  municipal  public  utility 
rendering  that  service  because  such  an  agreement 
seemed  to  the  court  necessary  to  secure  long  distance 
service  for  such  customers,  while  other  courts,  it 
would  seem,  with  better  reason,  have  insisted  that 
such  local  customers  should  not  be  precluded  from  the 
enjoyment  of  all  long  distance  service  that  might 
be  or  become  available  and  that  when  the  local  com- 
pany undertook  to  furnish  long  distance  service  and 
the  long  distance  company  undertook  to  accommodate 
the  local  customers  they  thereby  relinquished  their 
right  to  operate  independently  and  subjected  their 
plants  respectively  to  the  use  of  all  customers,  whether 
they  agreed  to  use  the  one  long  distance  company 
exclusively  or  patronized  all  such  companies  indis- 
criminately. 

§  553-     Contract  for  connected  or  through  service. 

— As  there  seems  no  legal  reason  for  making  the  dis- 
tinction between  local  and  long  distance  telephone 
service,  the  decisions  holding  that  where  by  virtue  of 
an  agreement  between  the  companies  furnishing  local 
and  long  distance  service  they  are  connected  for  the 
purpose  of  giving  consolidated  local  and  long  distance 
service,  this  service  becomes  available  to  all,  it  neces- 


6l9  TELEPHONE    SERVICE.  §  554 

sarily  follows  that  where  by  agreement  of  the  compa- 
nies furnishing  local  and  long  distance  service  respec- 
tively to  consolidate  their  service  that  such  service 
also  becomes  available  to  the  public  generally  and  that 
the  particular  company  rendering  the  long  distance 
service,  which  is  a  party  to  the  consolidating  contract, 
is  not  permitted  to  deny  service  to  a  customer  of  the 
local  company  who  may  also  avail  himself  of  the  long 
distance  service  rendered  by  a  company  in  competition 
with  the  former  one.  For  if  this  is  not  the  correct 
rule  a  municipal  public  utility  furnishing  a  service 
which  is  public  in  its  nature  and  a  natural  monopoly 
can  compel  a  customer  present  or  prospective  to  limit 
his  service  to  the  particular  company  and  thereby 
preclude  him  from  enjoying  other  similar  service  that 
is  available,  all  of  which  is  necessary  to  furnish  him 
with  complete  and  adequate  service. 

§  554.  Physical  connection  only  by  contract  or 
state  requirement. — The  courts  are  agreed  that  in  the 
absence  of  a  contract  between  competing  or  connect- 
ing companies  for  the  physical  connection  of  their 
telephone  plants  or  of  a  constitutional  or  statutory 
requirement  that  such  plants  be  connected  for  the 
purpose  of  exchanging  service,  such  companies  can 
not  be  required  to  make  a  physical  connection  of  their 
plants  by  the  use  of  a  common  switchboard  or  trunk 
line  between  their  exchanges,  although  the  few  deci- 
sions on  this  point  suggest  that  the  power  resides  in 
the  state  to  make  and  enforce  such  a  requirement  in 
the  form  of  a  regulation  of  the  service. 

§  555-  Cost  and  value  of  telephone  service  with 
increase  of  subscribers. — The  question  of  what  consti- 
tutes  a  reasonable   rate   for  telephone   service   is  ren- 


§  555  PUBLIC    UTILITIES.  620 

dered  more  complex  than  in  the  case  of  most  other 
municipal  pubHc  utihties  because  of  the  different 
classes  of  service  rendered  and  especially  for  the  rea- 
son that  unlike  other  municipal  public  utilities,  in  the 
case  of  telephone  service  the  theory  obtains  that  a 
decrease  in  the  rate  resulting  in  an  increase  in  the 
volume  of  the  business  will  not  yield  increased  profits 
proportionally,  because  the  increase  in  the  volume  of 
business  secured  is  accompanied  by  a  corresponding 
increase  in  the  operating  expenses.  The  fact  is  ad- 
mitted that  the  value  is  determined  by  the  extent  of 
the  telephone  service  furnished,  which  depends  directly 
upon  the  number  of  customers  served  by  the  particu- 
lar telephone  system,  for  connection  with  all  sub- 
scribers is  available  to  each  customer  by  virtue  of  the 
fact  merely  that  the  others  are  customers  which  in 
other  municipal  public  utilities  is  an  element  of  no 
consequence  because  the  nature  and  extent  of  the 
service  received  by  each  customer  is  individual  and 
independent  of  the  others,  the  number  of  which  does 
not  increase  the  value  of  the  service  furnished  the 
individual  customer.  It  is  evident  that  a  telephone 
exchange  with  a  thousand  subscribers  is  more  valua- 
ble to  each  of  the  thousand  subscribers  than  one  with 
a  hundred  subscribers  would  be  to  each  individually, 
and  this  fact  of  the  increase  in  the  value  of  the  service 
with  the  increase  in  the  number  of  customers  served, 
together  with  the  fact,  if  it  be  a  fact,  that  the  expense 
of  operation,  especially  that  of  maintaining  and  operat- 
ing the  switchboard,  increases  correspondingly  with 
the  increase  in  the  number  of  the  subscribers  to  the 
service,  makes  it  evident  that  the  determination  of  the 
proper  rate  for  telephone  service  requires  that  these 
two  elements,  which  seem  to  be  peculiar  features  of 
telephone   service,  be   considered   in   addition   to   other 


621  TELEPHONE   SERVICE.  §  556 

features  which  are  common  to  the  service  of  all  mu- 
nicipal public  utilities. 

§  556.  Classification  of  telephone  service. — The 
rule  prohibiting  discrimination  in  the  service  and  the 
rates  charged  for  it,  however,  is  applicable  to  the 
furnishing  of  telephone  service  to  the  same  extent 
and  for  the  same  reasons  that  it  is  applied  to  the  fur- 
nishing of  service  by  other  municipal  public  utilities, 
although  this  service  may  be  classified  as  resident  or 
business,  single  or  party  line,  and  with  reference  to 
the  distance  the  subscribers  are  located  from  the  ex- 
change, and  different  charges  may  be  made  for  the 
various  classes  of  service  in  proportion  to  the  differ- 
ence in  the  value  of  the  service  or  the  cost  of  furnish- 
ing it.  The  classification,  however,  must  be  a  reason- 
able one  and  a  different  rate  can  be  made  only  where 
the  value  of  the  service  or  the  cost  of  furnishing  it 
justifies  it,  and  such  a  company  would  not  be  permit- 
ted to  distinguish  between  old  and  new  subscribers 
as  such  by  requiring  a  higher  rate  of  all  parties  who 
become  subscribers  after  a  certain  time  than  parties 
who  are  then  subscribers  are  required  to  pay.  Nor 
can  the  municipal  public  utility  furnishing  telephone 
service  require  that  its  customers  use  the  service  of 
any  particular  system  exclusively  because  the  value  of 
the  telephone  service  and  the  conditions  upon  which 
the  franchise  is  granted  permitting  such  service  to  be 
furnished  are  the  facilities  which  it  will  afford  of  com- 
municating with  the  largest  possible  number  of  peo- 
ple. The  telephone  company  will  not  be  permitted 
to  restrict  its  customers  in  the  enjoyment  of  this  serv- 
ice to  its  own  system.  This  is  a  well-established  legal 
principle,  although  the  reason  generally  assigned  for 
refusing  this  restriction,  that  it  tends  to  stifle  com- 
petition,   is    being    more    generally    recognized    as    of 


§  557  PUBLIC    UTILITIES.  622 

doubtful  value  and  consequently  the  greater  necessity 
for  public  regulation  and  control  is  becoming  more 
generally  admitted/ 

§  557.  Physical  connection  by  constitutional  pro- 
vision.— The  giving  of  telephone  service  is  recognized 
as  being  public  in  its  nature  and  an  actual  necessity  to 

1  FEDERAL.— Billings  Mut.  Tel.  Co.  v.  Rocky  Mountain  Bell 
Tel.  Co.,  155  Fed.  207;  Pacific  Tel.  &  T.  Co.  v.  Anderson,  196  Fed. 
699;  United  States  Tel.  Co.  v.  Central  Union  Tel.  Co.,  171  Fed.  130; 
United  States  Telephone  Co.  v.  Central  Union  Tel.  Co.,  202  Fed.  66. 

ILLINOIS.- Chicago  Tel.  Co.  v.  Northwestern  Tel.  Co.,  199  111. 
324,  65  N.  E.  329;  Western  Union  Tel.  Co.  v.  Chicago  &  Paducah  R. 
Co.,  86  111.,  246,  29  Am.  Rep.  28;  Union  Trust  &  Savings  Bank  v. 
Kinlock  Long  Distance  T.  Co.,  258  111.  202,  101  N.  E.  535. 

INDIANA.— Central  Union  Tel.  Co.  v.  State  ex  rel.,  118  Ind.  194, 
19  N.  E.  604,  10  Am.  St.  114;  Home  Tel.  Co.  v.  North  Manchester  Tel. 
Co.,  47  Ind.  App.  411,  92  N.  E.  558;  State  ex  rel.  Goodwine  v.  Cad- 
wallader,  172  Ind.  619,  87  N.  E.  644,  89  N.  E.  319. 

KENTUCKY.— Campbellsville  Tel.  Co.  v.  Lebanon,  &c.,  Tel.  Co., 
118  Ky.  277,  26  Ky.  L.  127,  80  S.  W.  1114,  84  S.  W.  518;  Cumberland 
Tel.  &  T.  Co.  V.  Cartwrighl  Creek  Tel.  Co.,  32  Ky.  L.  1357,  108  S. 
W.  875;  Cumberland  Tel.  &  T.  Co.  v.  Brandon  (Ky.),  157  S.  W.  1119. 

MICHIGAN.— Bradford  v.  Citizens'  Tel.  Co.,  161  Mich.  385,  126  N. 
W.  444;  Mahan  v.  Michigan  Tel.  Co.,  13^  Mich.  242,  93  N.  W.  629. 

MISSISSIPPI.— Cumberland  Tel.  &  T.  Co.  v.  State,  100  Miss.  102, 
54  So.  670,  39  L.  R.  A.  (N.  S.)  277. 

MISSOURI.— Home  Tel.  Co.  v.  Sarcoxie  Light  &  Tel.  Co.,  236 
Mo.  114,  129  S.  W.  108,  141  S.  W.  845,  36  L.  R.  A.  (N.  S.)  124. 

NEBRASKA.— State  v.  Nebraska  Tel.  Co.,  17  Nebr.  126,  22  N. 
W.  237,  52  Am.  Rep.  404. 

NEW  YORK.— Central  New  York  Tel.  &  T.  Co.  v.  Averill,  199 
N.  Y.  128,  92  N.  E.  206,  32  L.  R.  A.  (N.  S.)  494. 

NORTH  CAROLINA.— Clinton-Dunn  Tel.  Co.  v.  Carolina  Tel. 
&  T.  Co.,  —  N.  Car.  —   74  S.  E.  636. 

OKLAHOMA.— Pioneer  Tel.  &  Tel.  Co.  v.  State  (Okla.),  134 
Pac.  398. 

SOUTH  CAROLINA.— Gwynn  v.  Citizens'  Tel.  Co.,  69  S.  Car.  434, 
48  S.  E.  460. 

TENNESSEE.— Home  Tel.  Co.  v.  People's  Tel.  &  T.  Co.,  125 
Tenn.  270,  141  S.  W.  845,  43  L.  R.  A.   (N.  S.)  845. 

TEXAS.— Southwestern  Tel.  &  T.  Co.  v.  State,  (Tex.  Civ.  App.) 
150  S.  W.  604. 

UNITED  STATES.— Atchison,  &c.,  R.  R.  Co.  v.  Denver,  &c.,  R. 
R.  Co.,  110  U.  S.  667,  28  L.  ed.  291;  Railroad  Commission  of  La.  v. 
Cumberland  Tel.  &  T.  Co.,  212  U.  S.  414,  53  L.  ed.  577. 


623  TELEPHONE   SERVICE.  §  55/ 

modern  business  methods,  so  that  the  municipal  pubHc 
utiHty  undertaking  to  furnish  such  service  is  obUged 
to  serve  all  w^ho  apply  and  are  willing  to  pay  for  it 
under  such  reasonable  rules  and  regulations  as  may 
be  required.  The  value  of  the  service  depends  directly 
upon  the  number  of  subscribers  to  the  service  who 
may  be  reached  by  it,  and  where  there  are  two  or 
more  telephone  companies  in  the  same  locality,  com- 
plete service  can  only  be  had  by  a  physical  connection 
of  the  different  plants  or  the  use  of  a  common  switch- 
board, unless  every  subscriber  for  telephone  service 
is  a  customer  of  each  of  the  plants  in  the  locality 
which  furnishes  such  service.  To  avoid  the  expense 
and  inconvenience  of  requiring  every  party  who  de- 
sires the  telephone  from  contracting  with  all  the  com- 
panies which  have  undertaken  to  furnish  it,  in  order 
to  secure  complete  service,  a  few  of  the  states  by  way 
of  regulating  the  furnishing  of  such  service  by  virtue 
of  a  constitutional  provision  require  the  physical 
connection  of  the  different  telephone  systems  and  the 
exchange  of  service  between  their  subscribers  so  that 
a  subscriber  to  either  company  may  reach  all  the  sub- 
scribers of  that  or  any  other  company  available  in  the 
particular  locality,  which  is  a  convenience  to  which 
they  are  entitled  under  the  constitution  of  the  state 
of  Montana,  for  as  the  court  in  the  case  of  Billings 
Mut.  Tel.  Co.  V.  Rocky  Mountain  Bell  Tel.  Co.,  155 
Fed.  207,  decided  in  1907,  says:  "It  is  clear  that  plain- 
tiff has  a  right,  under  the  constitution  of  the  state 
[section  14,  article  15],  to  connect  its  telephone  line 
with  defendant's.  ...  I  think  that  the  use  that 
may  be  acquired  by  the  plaintiff  company  is  such  as 
is  practicable  by  a  connection  like  that  had  in  the 
every  day  service  with  defendant's  own  connections. 
This  is  feasible  by  a  plan  of  trunking  between  the 
exchanges,  where  the  respective  switch  or  toll  boards 
are  maintained.     The  defendant  company  would  then 


§  55^  PUBLIC    UTILITIES.  624 

receive  the  business  from  the  plaintiff  as  it  now  re- 
ceives business  coming  from  one  of  its  own  sub- 
scribers. ...  In  other  words,  where  two  compa- 
nies owning  different  Hnes  of  telephones  in  Montana 
can  not  agree  upon  the  compensation  for  the  privilege 
of  connection  and  use,  the  law  of  Montana  obliges 
the  one  to  submit  to  connection  with  the  other,  and 
[upon  payment  of  damages  to  be  assessed],  to  accept 
a  patronage,  and  to  submit  to  a  necessary  use  that 
it  might  not  wish  to  accept  or  allow,  and  probably 
could  not  be  compelled  to  accept  or  allow,  were  it  not 
for  the  provisions  of  the  constitution  and  laws  of  the 
state." 

§  558.  Statutory  and  constitutional  requirements 
upheld. — That  a  similar  regulation  is  made  of  munici- 
pal public  utilities  undertaking  to  render  telephone 
service  in  the  state  of  Kentucky  by  virtue  of  a  consti- 
tutional provision  of  that  state  is  indicated  by  the  case 
of  Campbellsville  Tel.  Co.  v.  Lebanon,  &c.,  Tel.  Co., 
118  Ky.  277,  26  Ky.  L.  127,  80  S.  W.  11 14,  84  S.  W. 
518,  decided  in  1904,  where  the  court  sustained  an 
action  in  mandamus  to  compel  the  defendant  company 
to  receive  messages  over  its  wires  which  connected 
with  those  of  the  plaintiff  by  virtue  of  an  agreement 
between  them  to  that  effect  which  was  also  required 
of  them  by  virtue  of  the  constitutional  provision  so 
long  as  they  maintained  their  telephone  systems  and 
operated  their  exchanges,  for  as  the  court  said :  "In 
addition,  all  telephone  companies  operating  exchanges 
in  different  towns  or  cities  in  this  state  are  required 
by  the  constitution  of  this  commonwealth  to  receive 
and  transmit  messages  between  their  users. 
The  section  of  the  constitution  implies  that  such  con- 
nections shall  not  only  be  made,  and  the  service  al- 
lowed, but  that  they  shall,  be  maintained  and  continued. 
.     .     .     We  conclude  that  this  contract  was  not  deter- 


625  TELEPHONE    SERVICE.  §  559 

minable  at  the  will  of  either  of  the  parties  to  it,  but 
that  it  must  continue  during  the  corporate  existence 
of  the  two  companies." 

Wisconsin  has  statutory  provisions  for  physical 
connection  between  telephone  lines  to  be  made  under 
the  direction  of  the  railway  commission — sec.  1797  m- 
4,  ch.  499,  acts  1907.  Cf.  p.  798.  Physical  connection 
of  continuous  telephone  lines  for  through  service  may 
be  had  under  statutory  provisions  of  Indiana — sec.  8, 
Public  Utilities  Law,  ch.  76,  acts  1913,  Cf.  p.  853.  To 
the  same  efifect  is  sec.  40,  Public  Utilities  Act  of  Cali- 
fornia,   ch.    14,    acts    191 1,    effective    March    23,    1912. 

§  559.  Physical  connection  by  contract  available 
to  all  alike. — While  under  the  common  law  in  the  ab- 
sence of  constitutional  or  statutory  provision  of  the 
state  requiring  competing  companies  to  make  physical 
connection  of  their  plants  and  exchange  service  be- 
tween them,  they  can  not  be  required  to  do  so,  if  such 
connection  is  voluntarily  made  by  virtue  of  a  con- 
tract between  them,  the  public  thereby  acquires  an 
interest  in  the  connected  service  which  becomes  avail- 
able to  all  subscribers  of  telephone  service,  for  as  the 
court  in  the  case  of  State  ex  rel.  Goodwine  v.  Cadwal- 
lader,  172  Ind.  619,  87  N.  E.  644,  89  N.  E.  319,  decided 
in  1909,  says:  "A  telephone  company  doing  a  general 
telephone  business  is  a  common  carrier  of  news.  .  .  . 
This  duty  does  not  amount  to  an  absolute  requirement 
that  one  company  or  individual  shall  furnish  the 
patrons  of  another  the  use  of  its  or  his  exchange  and 
lines,  unless  it  has  been  voluntarily  undertaken,  so  that 
he  or  it  may  not  afterward  discriminate  in  classifica- 
tion. .  .  .  Such  physical  connection  can  not  be 
required  as  of  right,  but  if  such  connection  is  volun- 
tarily made,  as  is  here  alleged  to  be  Hie  case  by  con- 
tract, so  that  the  public  acquires  an  interest  in  its  con- 

40— Pub.  ut 


§  560  PUBLIC   UTILITIES.  626 

tinuance,  the  act  of  the  parties  in  making  such  con- 
nection is  equivalent  to  a  declaration  of  a  purpose  to 
waive  the  primary  right  of  independence,  and  it  im- 
poses upon  the  property  such  a  public  status  that  it 
may  not  be  disregarded.  .  .  .  We  think  it  certain 
that  the  property  of  each  of  the  parties  is  impressed 
with  such  a  public  interest  that,  neither  can  disregard 
it  [the  agreement  for  physical  connection]. 
If  service  is  furnished  to  one,  another  in  the  same  town 
or  city  is  entitled  to  the  same  service,  not  upon  the 
ground  of  a  primary  right,  but  because,  having  elected 
to  furnish  service  to  one,  the  same  obligation  arises 
in  favor  of  all  others  like  situated." 

§  560.  Through  telephone  service  peculiarly  nec- 
essary.— After  recognizing  the  necessity  for  through 
service  in  the  operation  of  telephone  plants  because 
the  conversation  can  not  be  relayed  as  in  the  case  of 
a  telegram  or  as  passengers  can  change  cars  or  be 
transferred  from  one  railroad  to  another  for  the  rea- 
son that  the  act  of  speaking  over  a  telephone  is  single 
and  instantaneous,  the  court  in  the  case  of  United 
States  Telephone  Co.  v.  Central  Union  Tel.  Co.,  171 
Fed.  130,  decided  in  1909,  in  refusing  to  recognize 
the  validity  of  a  contract  beween  a  municipal  public 
utility  rendering  local  telephone  service  and  one  ren- 
dering long  distance  telephone  service,  by  which  for 
a  long  period  of  years  the  latter  company  would  enjoy 
the  exclusive  service  from  the  local  plant,  for  the  rea- 
son that  this  would  restrict  the  customer  of  the  local 
service  to  the  use  of  one  long  distance  company  as 
well  as  tend  to  stifle  competition,  said:  "But  we  have 
a  very  different  situation  where,  as  in  this  case,  a  local 
company,  assuming  that  it  can  not  be  compelled  to 
make  or  permit  a  connection  with  a  long  distance  com- 
pany,   does    in   fact    permit   it.      If   the    local    company 


(i2J  TELEPHONE   SERVICE.  §  56I 

extends  the  use  of  its  lines  to  long  distance  service, 
does  it  make  the  long  distance  service  any  the  less  of 
a  public  character  than  its  local  service?  Assuming 
that  it  had  a  right  to  remain  independent  of  and  iso- 
lated from  long  distance  business,  does  it  not  give  up 
that  right  of  local  independence  and  isolation  when  it 
takes  on  long  distance  business?  And  if,  in  respect  to 
long  distance  business,  it  has  granted  the  right  of  con- 
nection to  one  long  distance  company,  can  it,  either 
under  the  common  law  or  the  statutes  of  Ohio,  deny 
to  one  long  distance  company  the  right  and  privilege 
which  it  has  "granted  to  another?  It  seems  to  me  that 
to  put  this  question  is  to  answer  it.  To  this  effect  is 
Ohio  ex  rel.  v.  Telephone  Company,  36  Ohio  St.  296, 
38  Am.  R.  583.  The  courts  have  had  great  difficulty 
in  getting  away  from  the  proposition  which  I  have 
suggested  in  the  discussion  under  the  head  immediately 
preceding  this.  They  have  had  difficulty  in  escaping 
the  conclusion  that  a  local  company  must  permit  con- 
nection to  be  made  with  other  exchanges,  whether  it 
desires  to  do  so  or  not.  But  they  have  found  them- 
selves compelled  to  come  to  the  conclusion  that  where 
two  companies  have  permitted  a  connection  to  be 
made  between  their  exchanges,  without  having  fixed 
by  contract  any  period  of  termination,  no  disconnection 
of  the  systems  can  be  permitted  except  such  as  arises 
out  of  the  total  retirement  from  business  by  one  or 
the  other  company.  State  v.  Cadwallader  (Ind.),  87 
N.    E.   644." 

§  561.  Undertaking  to  furnish  connected  service 
becomes  general. — The  recent  decision  in  the  case  of 
Clinton-Dunn  Tel.  Co.  v.  Carolina  Tel.  &  T.  Co.,  — 
N.  C.  — ,  74  S.  E.  636,  decided  April  17,  1912,  sus- 
tains the  principle  that  having  agreed  to  connect  their 
telephone   systems   and   to   give   exchange   service,   the 


§  562  PUBLIC    UTILITIES.  62S 

companies  are  thereby  precluded  from  disconnecting 
their  plants  and  are  obliged  to  furnish  all  with  ex- 
change service  who  are  or  become  customers  of  either 
company.  In  the  course  of  its  opinion  the  court  said: 
"In  the  absence  of  constitutional  or  statutory  require- 
ment, this  obligation  to  afford  service  at  reasonable 
rates  and  without  discrimination  to  all  who  will  'pay 
the  charges  and  abide  by  the  reasonable  regulations 
of  the  company'  does  not  as  a  rule  extend  to  making 
physical  connection  with  the  company's  lines,  but 
there  is  high  authority  for  the  position  that,  when  such 
physical  connection  has  been  voluntarily  made,  under 
a  fair  and  workable  arrangement  and  guaranteed  by 
contract  and  the  continuous  line  has  come  to  be 
patronized  and  established  as  a  great  public  conven- 
ience, such  connection  shall  not  in  breach  of  the  agree- 
ment be  severed  by  one  of  the  parties.  In  that  case 
the  public  is  held  to  have  such  an  interest  in  the  ar- 
rangement that  its  rights  must  receive  due  considera- 
tion." 

§  562.  Holding  out  consolidated  service  establishes 
it  permanently. — This  principle  is  sustained  in  the  case 
of  Mahan  v.  Michigan  Tel.  Co.,  132  Mich.  242,  93 
N.  W.  629,  decided  in  1903,  where  the  competing 
plants  were  bought  by  the  same  party  and  their  ex- 
changes connected.  In  refusing  the  right  to  discon- 
nect the  service  and  in  holding  that  the  connection 
between  the  exchanges  once  having  been  made  be- 
came constantly  available  to  the  public  the  court  said: 
"Users  of  the  Detroit  Telephone  Company  accepted 
this  service  and  paid  for  the  same  for  a  period  of  some- 
thing like  a  year  and  a  half.  We  are  of  the  opinion 
that  the  furnishing  of  the  service  by  the  respondent, 
the  Michigan  company,  and  the  acceptance  thereof  by 
the  subscribers  to  the  Detroit  company,  if  it  did  not 


629  TELEPHONE   SERVICE,  §  563 

constitute  a  new  implied  contract  between  the  Mich- 
igan company  and  said  subscribers,  at  least  furnishes 
a  construction  of  the  terms  of  the  ordinance  by  the 
parties  themselves  which  the  respondent,  the  Mich- 
igan Telephone  Company,  is  not  now  at  liberty  to 
repudiate." 

§  563.  Exclusive  contract  for  through  service  up- 
held from  necessity. — The  case  of  Cumberland  Tel.  & 
T.  Co.  V.  State,  loo  Miss.  102,  54  So.  670,  39  L.  R.  A. 
(N.  S.)  277,  decided  in  191 1,  sustains  a  contract  be- 
tween a  municipal  public  utility  rendering  local  tele- 
phone service  and  one  rendering  long  distance  service 
for  the  exclusive  service  of  the  latter  company  as  well 
as  the  agreement  to  the  effect  that  the  local  company 
would  not  extend  its  lines  so  as  to  conflict  with  the 
business  of  the  long  distance  company.  This  decision 
is  opposed  to  those  already  mentioned  so  far  as  it  up- 
holds the  contract  for  exclusive  service,  the  practical 
justification  for  the  decision  apparently  being  that  it 
was  necessary  in  order  to  secure  long  distance  service 
for  the  customers  of  the  local  company.  The  question 
as  to  the  necessity  of  the  contract,  however,  would 
seem  a  debatable  one,  as  the  long  distance  company 
had  already  established  itself  in  the  territory  of  the 
local  company  and  in  its  own  interest  would  probably 
have  received  long  distance  service  from  the  cus- 
tomers of  the  local  company  in  the  absence  of  an  ex- 
clusive contract  for  that  service  on  finding  that  it  was 
impossible  to  secure  such  a  contract.  The  reason 
given  for  the  decision  is  neither  convincing  nor  in 
harmony  with  what  seems  to  be  the  prevailing  rule 
regulating  the  furnishing  of  such  municipal  public 
utility  service.  In  the  course  of  its  opinion  the  court 
said :  "The  contract  on  the  part  of  the  Oxford  system 
to  give  its  long  distance  messages  to  the  Cumberland 


§  564  PUBLIC    UTILITIES.  63O 

exclusively,  for  the  period  of  the  contract  was  not  in 
violation  of  the  law.  It  was  based  upon  a  valuable 
consideration  to  both  systems,  and  was  not  inimical 
to  the  public  interest  in  any  way." 

§  564.  Necessity  for  exclusive  service  question  of 
fact. — A  decision  similar  in  its  effect  to  this,  although 
not  to  the  same  degree  objectionable  is  found  in  the 
case  of  Home  Tel.  Co.  v.  North  Manchester  Tel.  Co., 
47  Ind.  App.  411,  92  N.  E.  558,  decided  in  1910,  where 
the  court  upholds  a  contract  for  the  exclusive  service 
of  all  outgoing  messages  to  points  reached  by  the  long 
distance  company  in  question  for  the  reason  that  such 
an  agreement  was  necessary  to  secure  long  distance 
service,  although  the  contract  did  not  exclude  the  local 
company  from  receiving  incoming  messages  over 
other  long  distance  lines  or  sending  messages  over 
other  lines  to  points  not  served  by  the  former  long 
distance  company.  In  .the  course  of  its  opinion  the 
court  said:  "The  contract  in  question  does  not  pro- 
vide against  connections  being  made  with  appellant's 
switchboard  by  other  companies  or  receipt  of  messages 
therefrom,  and  therefore  it  can  not  be  said  that  it  was 
a  violation  of  the  agreement  to  permit  the  Commercial 
Telephone  Company  to  connect  therewith,  and  thereby 
transmit  messages  to  appellant.  The  contract  does, 
however,  provide  that  all  of  the  toll  business  originat- 
ing in  or  through  the  appellant  company  for  trans- 
mission to  points  on  appellee's  lines  should  be  given 
to  appellee.  .  .  .  But  the  rule  is  that  all  contracts 
in  restraint  of  trade  are  not  necessarily  invalid  where 
such  restraint  is  only  partial,  incidental  or  minor  to 
the  main  object  sought  to  be  obtained  which  is  for 
the  public  good.  .  .  .  It  is  found  by  the  court  that 
the  contract  in  question  was  entered  into  for  the  pur- 
pose of  establishing  a  competitive  long  distance  tele- 


631  TELEPHONE    SERVICE.  §5^5 

phone  system  in  the  locaHties  reached;  that  such  a 
mutual  agreement  was  essential  to  the  existence  of 
such  a  system.  The  main  purpose  of  the  combination 
was  therefore  not  to  restrain  trade,  but  to  extend  it; 
the  restraint  in  effect,  if  any,  being  only  incidental  and 
minor." 

§  565.  Common-law  and  statutory  regulations  dis- 
tinguished.— That  relief  of  this  nature  is  available  by 
constitutional  or  statutory  provision  requiring  it  is 
suggested  in  practically  all  the  decisions  from  the  early 
one  of  Atchison,  &c.,  R.  R.  Co.  v.  Denver,  &c.,  R.  R. 
Co.,  no  U.  S.  667,  28  L.  ed.  291,  decided  in  1884, 
where  the  court  in  the  case  of  a  common  carrier  says 
that  as  the  one  corporation  is  not  bound  to  carry  be- 
yond its  own  line,  if  it  contracts  to  do  so  under  the 
common  law  it  has  the  right  to  select  the  company 
in  connection  with  which  it  would  carry  out  the  con- 
tract for  through  service,  the  court  adding,  however, 
that :  "Such  matters  are  and  always  have  been  proper 
subjects  for  legislative  consideration,  unless  prevented 
by  some  charter  contract;  but,  as  a  general  rule,  reme- 
dies for  injustice  of  that  kind  can  only  be  obtained 
from  the  legislature." 

The  courts  are  agreed  that  in  the  absence  of  a  stat- 
utory or  constitutional  provision  requiring  the  making 
of  physical  connection  between  telephone  plants  or  of 
their  voluntarily  agreeing  to  do  so  that  the  customers 
of  either  have  not  the  right  to  require  exchange  serv- 
ice with  the  customers  of  the  other,  for  as  the  court 
in  the  case  of  Home  Telephone  Co.  v.  People's  Tel.  & 
T.  Co.,  125  Tenn.  270,  141  S.  W.  845,  decided  in  191 1, 
says:  "Telephone  and  telegraph  companies  are  com- 
mon carriers  of  intelligence,  and  must  give  the  same 
service  on  the  same  terms  to  all  who  apply  therefor, 
without  partiality  or  unreasonable  discrimination.    But 


§  566  PUBLIC    UTILITIES.  632 

this  does  not  mean  that  a  telephone  company  is  bound 
to  permit  another  telephone  company  to  make  a 
physical  connection  with  its  lines  for  the  purpose  of 
using  them  as  its  own  subscribers  use  them.  There 
is  a  wide  difference  between  a  telephone  company's 
transmitting  to  any  point  on  its  line  equally  and  in- 
discriminately the  messages  of  all  companies  that  offer 
them  and  are  willing  to  pay  the  same  fare  for  the  same 
service,  and  admitting  such  outside  companies  or 
their  patrons  to  the  same  use  of  its  lines  that  its  own 
patrons  are  entitled  to." 

§  566.     Public   and   private   business   distinguished. 

— This  court  also  takes  exception  to  the  position  of 
the  Supreme  Court  of  Indiana  in  the  decision  of  State 
ex  rel.  Goodwine  v.  Cadwallader,  172  Ind.  619,  87  N. 
E.  644,  89  N.  E.  319,  already  referred  to,  in  requiring 
that  competing  companies  which  have  agreed  to  con- 
nect their  service  shall  continue  to  give  such  service  so 
long  as  they  maintained  their  exchanges.  In  holding 
that  this  is  an  undue  interference  with  the  right  to 
contract,  the  court  fails  to  recognize  the  difference 
between  the  exercise  of  this  right  with  respect  to 
private  business  and  those  concerned  with  the  giving 
of  service  to  the  public,  for  the  municipal  public  utility 
undertaking  to  serve  the  public  in  a  particular  way  is 
generally  held  liable  to  serve  all  without  distinction 
so  long  as  it  undertakes  to  render  public  service.  In 
the  course  of  its  opinion,  criticising  the  decision  of  the 
Supreme  Court  of  Indiana  to  this  effect,  the  court 
says:  "Such  a  rule,  while  in  terms  asserting  the  inde- 
pendent right  of  contract,  denies  its  existence  in  fact. 
Moreover,  it  enables  one  company  to  take  the  property 
of  another  for  public  use  without  compensation,  and 
•deprives   the   latter   company   of   its   property   without 


633  TELEPHONE    SERVICE.  §  567 

due  process  of  law,  in  violation  of  the  constitution  of 
this  state  and  of  the  United  States." 

§  567.  Necessity  for  state  regulation  to  insure  pub- 
lic complete  service. — A  strong  statement  of  the  com- 
mon-law rule  denying  the  right  to  require  physical 
connection  between  telephone  plants  and  of  the  conse- 
quent necessity  for  state  regulation  in  this  respect  if 
the  public  is  to  have  the  advantage  of  complete  service 
is  furnished  in  the  recent  case  of  Home  Tel.  Co.  v. 
Sarcoxie  Light  &  Tel.  Co.,  236  Mo.  114,  139  S.  W. 
108,  36  L.  R.  A.  (N.  S.)  124,  decided  in  191 1,  where 
the  court  said:  "It  must  be  borne  in  mind  that,  as  to 
business  coming  from  the  Bell  Company  to  the 
Sarcoxie  Company,  the  Bell  Company  is  in  the  atti- 
tude of  an  individual,  with  no  less  nor  more  rights. 
The  individual  in  the  town  can  compel  the  Sarcoxie 
Company,  upon  tender  of  proper  charges,  to  extend 
its  services  by  phone  to  his  place  of  business  or  resi- 
dence. The  corporation  can  do  the  same  thing,  but 
not  more.  The  individual  can  not  build  a  line  of  his 
own  and  demand  physical  connection;  neither  can  the 
corporation.  If  the  Bell  Company  at  Sarcoxie  de- 
manded of  the  local  Sarcoxie  Company  that  it  place 
a  phone  in  its  place  of  business,  such  would  be  within 
the  rights  guaranteed  by  the  statute.  If  it  went  to  the 
Sarcoxie  Company  and  tendered  the  proper  fee,  and 
said  it  wanted  to  talk  over  their  line,  such  would  be 
within  the  statute;  but  if  it  demanded  that  a  physical 
connection  be  made  between  the  two  lines,  so  that 
its  customers  could  talk  over  the  lines  of  the  Sarcoxie 
Company,  that  is  an  entirely  different  question.  With 
its  customers  the  Bell  Company  is  doing  in  a  way  a 
private  business.  This  private  business  it  can  not 
foist  upon  a  competing  line,  save  and  except  as  an 
individual   could    go    to    such    competing   line    and    de- 


§  568  PUBLIC   UTILITIES.  634 

mand  service.  In  other  words,  one  telephone  com- 
pany, without  the  consent  of  the  other,  can  not  take 
charge  of  and  use  the  instrumentahties  of  such  other 
company  by  compeUing  physical  connection  therewith. 
The  statute  in  question  never  so  contemplated." 

§  568.  Service  of  common  carrier  and  telephone 
distinguished. — A  further  recent  decision  on  this 
phase  of  the  question  is  furnished  in  the  case  of 
Pacific  Tel.  &  T.  Co.  v.  Anderson,  196  Fed.  699,  de- 
cided February  13,  1912,  where  the  court  upheld  an 
exclusive  contract  between  municipal  public  utilities 
rendering  telephone  service  and  denied  this  right  to 
make  physical  connection  with  the  plants  belonging 
to  the  parties  to  the  contract  to  any  other  company 
or  individual,  in  the  absence  of  a  constitutional  or 
statutory  provision  requiring  that  such  connection  be 
made.  The  tendency  of  this  decision  is  not  in  har- 
mony with  the  case  of  United  States  Tel.  Co.  v.  Cen- 
tral Union  Tel.  Co.,  171  Fed.  130,  and  other  cases 
which  have  already  been  discussed.  As  the  decision 
is  based  on  reasoning  by  analogy  to  the  case  of  agree- 
ments for  through  service  commonly  entered  into 
between  connecting  rather  than  competing  railroads, 
the  decision  fails  to  distinguish  between  the  nature 
of  the  service  rendered  in  the  two  cases,  for  while 
complete  through  service  may  be  provided  by  a  con- 
tract between  such  common  carriers,  such  service  is 
not  furnished  by  a  contract  between  two  telephone 
companies  which  are  either  competing  or  connecting 
because  only  subscribers  to  their  telephone  service 
are  included  by  virtue  of  such  an  exclusive  contract, 
and   they  are   excluded  from   all  other  service. 

The  federal  decision  in  the  case  of  the  United 
States  Telephone  Co.  is  based  upon  statutory  provi- 
sions in  Ohio,  which  the   court   found  clearly  prohib- 


635  TELEPHONE   SERVICE.  §  568 

ited  the  making  of  exclusive  contracts  for  such  service 
because  their  tendency  was  to  stifle  competition,  while 
in  the  Pacific  Telephone  Co.  case,  as  indicated  by  the 
decision,  the  state  of  Washington  had  enacted  no 
such  statutory  provisions,  but  instead  had  provided 
that  the  matter  of  requiring  physical  connection  be- 
tween telephone  companies  for  the  sake  of  securing 
through  service  be  placed  in  the  hands  of  its  public 
service  commission  with  power  to  require  such  con- 
nection to  be  made  where  in  its  opinion  such  connec- 
tion should  be  established.  In  the  course  of  its  opin- 
ion the  court  said:  "All  the  authorities  agree  that 
at  common  law  each  telephone  company  is  indepen- 
dent of  all  other  telephone  companies,  save  for  the 
duty  to  receive  and  forward  to  any  point  on  its  Hne 
messages  received  from  such  other  company  or  com- 
panies; and  hence,  that  it  is  not  bound  to  accord  to 
any  such  outside  organization  or  its  patrons  connec- 
tions with  its  switchboard  on  an  equality  with  its  own 
patrons;  that  such  connection  is  a  privilege  to  be  ac- 
corded only  as  the  result  of  private  contract  or  in 
obedience  to  some  constitutional  or  statutory  provi- 
sion. State  V.  Cadwallader,  172  Ind.  619.  87  N.  E. 
644,  89  N.  E.  319;  Home  Telephone  Co.  v.  Sarcoxie 
Light  &  Telephone  Co.,  141  S.  W.  845,  decided  De- 
cember 16,  191 1,  by  the  Supreme  Court  of  Tennessee. 
I  do  not  understand  that  this  rule  is  questioned  by  the 
defendants,  but  they  earnestly  maintain  that,  because 
the  Anderson  Company  made  physical  connection  with 
the  complainant  company,  it  was  bound  by  the  com- 
mon law  to  grant  the  same  privileges  to  any  other 
individual  or  company  on  the  same  terms  and  condi- 
tions. I  can  not  concede  that  such  is  the  rule  of  the 
common  law.  .  .  .  Where  a  public  service  corpora- 
tion enters  into  private  contracts  with  others  in  fur- 
therance of  its  business.  I  find  no  warrant  for  holding 


§  569  PUBLIC    UTILITIES.  636 

that  its  public  duties  are  in  all  cases  extended  to  the 
full  scope  of  the  private  contract.  .  .  .  The  defend- 
ant companies  had  therefore  no  right  to  demand  a 
physical  connection  with  the  Anderson  line  simply 
because  that  right  had  been  accorded  to  another,  and 
they  certainly  have  no  such  rights  under  the  statute 
of  this  state,  for  that  statute  vests  the  power  and  dis- 
cretion to  direct  physical  connection  in  the  public 
service  commission.     Laws  Wash.  1911,  p.  585,  §73." 

§  569.  Doctrine  of  increasing  cost  of  service  pe- 
culiar to  telephone. — The  doctrine  which  is  claimed 
to  have  application  peculiarly  to  the  case  of  the  mu- 
nicipal public  utility  rendering  telephone  service  to 
the  effect  that  the  expense  of  operation  increases 
correspondingly  with  the  increase  of  business  and  that 
the  general  rule  applicable  to  other  municipal  public 
utilities  where  the  volume  of  the  service  and  the  con- 
sequent profits  of  the  company  may  be  increased  by 
decreasing  the  rates  for  the  service  is  recognized  by 
the  decision  of  the  Supreme  Court  of  the  United 
States  in  the  case  of  Railroad  Commission  of  La.  v. 
Cumberland  Tel.  &  T.  Co.,  212  U.  S.  414,  53  L.  ed. 
577,  decided  in  1909,  as  follows:  "If  higher  rates 
have  been  in  operation,  and  the  result  has  shown  that 
they  were  only  reasonable  and  fair  rates,  it  would, 
in  such  a  business  as  this,  follow,  with  considerable 
certainty,  that,  with  lower  rates,  the  profits  would  be 
decreased  and  become  unreasonably  low.  We  say 
this  because  the  evidence  shows  that,  in  the  case  of 
telephone  companies,  the  general  result  of  a  reduction 
of  rates  in  some  other  kinds  of  business  does  not  al- 
ways follow — namely,  that  there  would  be  an  increased 
demand,  which  could  be  supplied  at  a  proportionately 
less  cost  than  the  original  business.  Such,  it  is  ad- 
mitted, would  be  the  case  generally  in  regard  to  water 


637  TELEPHONE    SERVICE.  §  57O 

companies,  gas  companies,  railroad  companies,  and 
perhaps  some  others,  where  the  rate  is  a  reasonable 
one.  ...  In  these  cases  increased  profits  might 
be  the  result  of  decreased  rates.  But  with  telephone 
companies,  as  shown  by  the  testimony  of  the  president 
of  the  complainant,  the  reduction  in  toll  rates  does  not 
bring  an  increased  demand,  except  upon  the  condition 
of  corresponding  increase  in  expenses." 

§  570.     Value  of  service  increases  with  its  amount. 

— A  further  pertinent  decision  on  this  point  illustrating 
the  reason  for  the  doctrine  which  seems  peculiar  to 
the  case  of  the  municipal  public  utility  rendering  tele- 
phone service  is  furnished  in  the  case  of  Bradford 
V.  Citizens'  Tel.  Co.,  i6i  Mich.  385,  126  N.  W.  444, 
decided  in  1910,  where  the  court  in  refusing  to  permit 
the  company  to  distinguish  between  the  rates  charged 
old  and  new  subscribers  for  the  same  service  stated 
that :  "While  it  is  probably  true  that  the  cost  of 
operating  a  telephone  exchange  increases  with  the  in- 
creased volume  of  business,  it  is  equally  true  that  the 
whole  body  of  subscribers,  whether  new  or  old,  makes 
the  added  expense,  and  reaps  the  added  benefit.  A 
telephone  exchange  with  1,000  members  is  manifestly 
more  valuable  to  every  subscriber  than  one  with  100 
members,  but  it  is  equally  valuable  to  each  member  in 
the  same  class,  and  its  value  to  the  subscriber  does 
not  depend,  in  any  degree,  upon  whether  he  is  a  new 
subscriber  or  an  old  one.  It  is  difficult  to  understand 
why  new  subscribers  should  pay  any  more  for  the 
right  to  talk  to  old  members  than  the  latter  do  for 
the   right  to  talk  to  new  ones." 

§  571.  No  discrimination  in  rates  nor  limitation  of 
service. — The  rule  refusing  the  right  to  discriminate 
in  rates  for  the  same  service,  although  permitting  the 


§  571  PUBLIC    UTILITIES.  638 

municipal  public  utility  to  classify  the  telephone  serv- 
ice rendered  along  reasonable  lines  is  as  well  estab- 
lished as  to  the  giving  of  telephone  service  as  that  of 
any  other  municipal  public  utility.  Nor  should  a  con- 
tract for  telephone  service  discriminate  as  to  the  class 
or  number  of  persons  to  be  served  by  a  contract  to 
take  service  exclusively  of  one  company,  for  as  the 
court  in  the  case  of  Central  New  York  Tel.  &  T.  Co. 
V.  Averill,  199  N.  Y.  128,  92  N.  E.  206,  32  L.  R.  A. 
(N.  S.)  494,  decided  in  1910,  says:  "It  is  manifest 
that  the  exclusive  clause  is  a  contract  in  restraint  of 
trade.  It  prevents  any  one  in  the  Yates  Hotel  from 
having  telephone  communication  with  customers  of 
other  telephone  companies  than  the  plaintiff.  It  pre- 
vents the  persons  served  by  such  other  companies 
from  having  telephonic  communication  with  the  Yates 
Hotel.  It  likewise  destroys  competition  by  shutting 
out  all  rivals  of  the  plaintiff.  .  .  .  The  feature  01 
the  modern  telephone  system  which  constitutes  its 
public  value  and  affects  it  with  a  public  interest  is  its 
ability  to  bring  each  customer  into  vocal  communica- 
tion with  hundreds  and  oftentimes  thousands  of  others. 
This  makes  it  an  instrument  of  great  public  conven- 
ience and  utility,  the  usefulness  of  the  service  offered 
by  each  company  being  directly  proportionate  to  the 
number  of  persons  who  can  be  reached  thereby.  The 
franchise  having  been  granted  because  of  this  very 
element — that  is  to  say,  the  capacity  to  serve  the  com- 
munity so  generally  by  serving  so  large  a  number  of 
individuals  constituting  the  community — it  can  not  be 
tolerated  that  any  grantee  of  the  franchise  shall  exer- 
cise it  in  such  a  way  as  to  lessen  the  value  of  the 
telephone  as  an  instrumentality  of  service  to  the  pub- 
lic. If  a  telephone  company  may  contract  for  the 
exclusion  of  any  other  telephone  service  from  the 
premises  of  its  customers,  it  may  thus  deprive  all  those 


639  TELEPHONE  SERVICE.  §  57 1 

customers  of  telephone  communication  with  every 
person  who  takes  telephone  service  from  rival  con- 
cerns, and  thus  prevent  just  what  all  telephone  fran- 
chises are  designed  to  promote — that  is,  the  availa- 
bility to  every  member  of  the  community  who  desires 
it,  and  can  afford  to  pay  for  it,  of  the  most  extensive 
telephone  service  attainable.  .  .  .  It  is  sometimes 
argued  that  the  presence  of  two  telephone  systems  in 
a  given  district  is  a  disadvantage  to  the  community, 
which  is  best  served  by  one  system  reaching  all  sub- 
scribers; but  one  system  will  never  be  made  to  reach 
all  subscribers  as  cheaply  as  would  otherwise  be  the 
case  if  the  possibility  of  competition  is  destroyed." 


CHAPTER  XXVIII. 

MUNICIPAL   OWNERSHIP. 

Section. 

572.  Ownership   unless   regulation   adequate. 

573.  Power   of  municipality   to   own  and   operate  municipal   public 

utilities. 

574.  Eminent  domain  always  available  to  municipality. 

575.  Just  compensation  condition  not  limitation  on  its  exercise. 

576.  Motive  of  municipal  and  private  owners  compared. 

577.  Failure  of  regulation  necessitates  ownership  by  municipality. 

578.  Tendency  and  attitude  of  courts  toward  municipal  ownership. 

579.  Municipal  ownership  and  interests  of  public. 

580.  Policy  of  municipal  ownership  legislative  not  judicial  question. 

581.  Sale  to  municipality  without  statutory  authority. 

582.  Extension  of  sphere  of  municipal  activity  necessary. 

583.  Practical    necessity    long    recognized    as    basis    of    municipal 

ownership. 

584.  Ownership   without   operation   permitted. 

585.  Constitutionality  of  municipal  ownership  unquestioned. 

§  572.  Ownership  unless  regulation  adequate. — 
The  only  alternative  or  preventive  of  municipal  ow^ner- 
ship  of  municipal  public  utilities  is  their  adequate  reg- 
ulation and  control  by  the  municipaHty  or  by  a  state 
or  municipal  commission  acting  under  authority  con- 
ferred upon  it  for  that  purpose  by  the  state.  With 
an  efficient  regulation  and  control  of  the  service  fur- 
nished by  municipal  public  utiHties  and  the  rates 
charged  for  it,  the  necessity  for  municipal  ov^nership 
as  a  means  of  regulation  and  control  in  the  majority 
of  cases  at  least  would  disappear,  although  the  power 
of  the  municipality  to  own  and  operate  its  municipal 
public  utilities  should  always  be  available.  This  posi- 
tion of  the  municipality  is  necessary  to  put  it  on  an 
640 


641  MUNICIPAL    OWNERSHIP.  §  573 

equality  with  the  municipal  public  utility  and  to  en- 
able it  properly  to  conserve  its  interests  and  secure  for 
its  inhabitants  at  all  times  efficient  service  at  reason- 
able rates. 

§  573-  Power  of  municipality  to  own  and  operate 
municipal  public  utilities. — In  addition  to  the  right 
now  commonly  belonging  to  the  municipality  to  pur- 
chase and  operate  any  municipal  public  utility  by  vir- 
tue of  an  express  reservation  in  the  franchise  or  con- 
tract of  the  municipality^  or  pursuant  to  statutory 
authority  expressly  granted  or  necessarily  implied^ 
which  has  already  been  discussed  in  another  connec- 
tion, it  may  generally  do  so  by  the  exercise  of  the 
right  of  eminent  domain.  Although  the  municipal 
public  utility  belonging  to  private  capital  serves  a 
public  purpose  and  performs  a  public  duty,  it  is  not 
by  virtue  of  that  fact  exempt  from  the  exercise  of  this 
right  of  eminent  domain  belonging  to  the  municipality 
or  other  agency  of  the  state  when  acting  under  proper 
statutory  authority,  for  the  state  and  its  agency,  the 
municipality  or  commission,  when  authorized  for  that 
purpose  may  at  any  time  exercise  the  power  of  emi- 
nent domain  over  private  property  within  its  jurisdic- 
tion. 

§  574.  Eminent  domain  always  available  to  mu- 
nicipality.— The  rule  of  law  is  well  established  that 
the  legislative  authorities  of  the  state  or  the  municipal- 
ity can  not  by  contract  or  legislative  enactment  surren- 
der or  barter  away  their  right  to  exercise  the  power  of 
eminent  domain  nor  can  they  preclude  their  successors 
from  doing  so.  The  exercise  by  the  state  or  the  mu- 
nicipality pursuant  to  authority  delegated  to  it  by  the 

1  Chapter  7. 

2  Chapters  4  and  5. 
41— Pub.  Ut. 


§  574  PUBLIC    UTILITIES.  642 

State  of  the  right  to  take  title  to  property  for  a  public 
purpose  on  paying  just  compensation  for  it  is  always 
available.  Nor  is  the  exercise  of  this  right  Hmited  to 
the  taking  of  property  which  is  devoted  to  private 
purposes  only,  but  property  which  is  being  used  for 
pubHc  purposes  as  well  may  be  taken  in  this  way  by 
the  state  or  the  municipality  which  holds  it  for  a  more 
general  disinterested  purpose,  subject  to  a  larger  scope 
and  for  the  benefit  and  general  welfare  of  the  entire 
public;  as  the  court  in  the  case  of  In  re  City  of  Brook- 
lyn, 143  N.  Y.  596,  38  N.  E.  983,  26  L.  R.  A.  270, 
decided  in  1894,  so  well  expressed  it:  "While  the 
purpose  of  the  water-works  company  was  public  in 
its  nature,  it  can  not  be  said  to  be  strictly  identical 
with  the  municipal  purpose.  A  municipal  corporation 
is  a  public  and  governmental  agency.  It  holds  prop- 
erty for  the  general  benefit,  with  a  larger  scope  of 
use.  When  acquired  by  the  municipaHty  of  the  city 
of  Brooklyn,  the  appellant's  property  would  become 
a  part  of  a  general  system,  under  a  single  manage- 
ment, and  conducted  essentially  as  a  public  work.  If, 
in  order  the  better  to  subserve  the  public  use,  the 
appropriation  of  private  property  is  necessary,  even 
though  it  be  already  devoted  to  a  similar  use,  the 
right  to  make  it  is  incident  to  the  legislative  power, 
and  it  is  necessary  for  the  general  good  that  the  right 
be  conceded.  All  property  within  the  state  is  subject 
to  the  right  of  the  legislature  to  appropriate  it  for  a 
necessary  and  reasonable  public  use,  upon  a  just  com- 
pensation being  provided  to  be  made  therefor,  and 
there  can  be  no  distinction  in  favor  of  corporations 
whose  franchises  and  operations  impart  to  them  a 
quasi  public  character.  We  think  it  very  apparent  that 
the  public  use  to  which  the  appellant's  property  is  to 
be  devoted  by  the  provisions  of  the  act  does  differ, 
and  that  it  is  of  a  higher  and  wider  scope." 


643  MUNICIPAL    OWNERSHIP.  §  575 

§  575-  Just  compensation  condition  not  limitation 
on  its  exercise. — In  this  same  case  on  appeal  to  the 
Supreme  Court  of  the  United  States  under  title  of 
Long  Island  Water  Supply  Co.  v.  Brooklyn,  i66  U.  S. 
685,  41  L.  ed.  1 165,  decided  in  1897,  that  tribunal  said: 
"All  private  property  is  held  subject  to  the  demands 
of  a  public  use.  The  constitutional  guaranty  of  just 
compensation  is  not  a  limitation  of  the  power  to  take, 
but  only  a  condition  of  its  exercise.  Whenever  public 
uses  require,  the  government  may  appropriate  any 
private  property  on  the  payment  of  just  compensation. 
That  the  supply  of  water  to  a  city  is  a  public  purpose 
can  not  be  doubted,  and  hence  the  condemnation  of 
a  water-supply  system  must  be  recognized  as  within 
the  unquestioned  limits  of  the  power  of  eminent  do- 
main. .  .  .  The  state,  which,  in  the  first  place,  has 
the  power  to  construct  a  water-supply  system  and 
charge  individuals  for  the  use  of  the  water,  may  con- 
demn a  system  already  constructed,  and  continue  to 
make  such  charge.  This  is  not  turning  property  from 
one  private  corporation  to  another,  but  taking  prop- 
erty from  a  private  corporation  and  vesting  the  title 
in  some  municipal  corporation  for  the  public  use.  It 
is  not  essential  to  a  public  use  that  it  be  absolutely 
free  and  without  any  charge  to  any  one." 

§  576,  Motive  of  municipal  and  private  ov^oiers 
compared. — The  reason  for  this  principle  permitting 
the  state  or  the  municipality  to  acquire  the  private 
property  of  the  municipal  public  utility,  although  it  is 
serving  a  public  purpose  is  indicated  by  the  fact  that 
the  motive  and  purpose  of  the  municipality  or  the 
state  is  to  secure  adequate  and  efficient  municipal  pub- 
lic utility  service  for  its  citizens  at  the  most  reason- 
able possible  rate  which  is  in  sharp  contrast  to  the 
very  natural  attitude  of  the  privately  owned  municipal 


§  577  PUBLIC    UTILITIES.  644 

public  utility  in  its  desire  to  receive  the  greatest  pos- 
sible return  on  its  investment  for  which  it  renders  such 
municipal  public  utility  service  as  seems  expedient  for 
securing  such  returns  or  may  be  required  of  it,  for  as 
the  court  in  the  case  of  Louisville  Home  Tel.  Co.  v. 
Louisville,  130  Ky.  611,  113  S.  W.  855,  decided  in 
1908,  expresses  it:  "From  this  view^  of  the  subject  it 
v^ill  readily  be  seen  that  the  primary  object  a  city 
would  have,  in  contracting  for  or  procuring  the  service 
of  such  utilities,  is  not  the  revenue  to  be  obtained  for 
the  city,  but  the  securing  of  good  and  efficient  service, 
and  upon  such  terms  as  will,  in  the  judgment  of  the 
city's  governing  body,  promote  the  greatest  good,  not 
alone  to  those  who  use  the  utility,  the  telephone  for 
instance,  but  to  the  entire  community,  including  the 
city   government." 

§  577.  Failure  of  regulation  necessitates  ownership 
by  municipality. — The  practical  justification  for  mu- 
nicipal ownership  of  municipal  public  utilities  is  the 
failure  commonly  experienced  under  any  other  form 
of  regulation  and  control  to  secure  satisfactory  service 
at  a  fair  uniform  rate.  Naturally  the  purpose  and  the 
chief  motive  of  the  privately  owned  municipal  public 
utility  is  to  secure  the  largest  possible  return  on  its 
investment,  while  the  motive  of  the  municipality  in 
furnishing  such  service  by  its  own  plant  is  not  pri- 
marily selfish  or  mercenary  beyond  the  point  of  mak- 
ing the  business  self-sustaining,  its  chief  object  being 
rather  to  furnish  efficient  comprehensive  service  to  its 
inhabitants  at  cost. 

§  578.  Tendency  and  attitude  of  courts  toward 
municipal  ownership. — In  the  case  of  Mayo  v.  Town 
of  Washington,  122  N.  Car.  5,  29  S.  E.  343,  40  L.  R. 
A.  163,  decided  in  1898,  Clark,  J.,  in  a  dissenting  opin- 


645  MUNICIPAL    OWNERSHIP.  §  578 

ion  which  is  later  expressly  upheld  by  the  same  court 
in  the  case  of  Fawcett  v.  Mt.  Airy,  134  N.  Car.  125, 
45  S.  E.  1029,  63  L.  R.  A.  870,  Id  Am.  St.  825,  in 
speaking  of  the  attitude  of  the  court  toward  the  policy 
of  municipal  ownership  and  of  the  tendency  of  such 
ownersliip  to  become  more  fully  established  in  prac- 
tice, says:  "It  would  seem,  however,  that  city  owner- 
ship of  water  as  well  as  electric  lighting  plants  is  a 
matter  vesced  in  the  discretion  of  the  city  government. 
Light  and  water,  sewerage  and  sanitation,  paving  and 
fire  protection  are  necessities,  and  are  objects  to  be 
obtained  by  municipal  organization.  .  .  .  There 
is  an  unmistakable  trend  the  world  over  toward  mu- 
nicipal ownership  of  lighting,  water-works,  and  even 
(to  some  extent)  street  railways.  Judge  Dillon  refers 
to  this,  and  intimates  that  it  is  commended  by  wisdom 
and  sound  policy.  Dill.  Mun.  Corp.,  §691,  note  i. 
In  Germany  two-thirds  of  the  cities  own  their  electric 
lighting  and  car  plants,  and  the  proportion  is  increas- 
ing. The  same  is  true  of  the  other  countries  of  con- 
tinental Europe,  there  being  a  great  increase  in  mu- 
nicipal ownership  since  Judge  Dillon  wrote.  In  Great 
Britain  and  Ireland  203  cities  and  towns,  being  in  fact 
every  city  of  any  importance  save  five,  own  their 
lighting  plants,  not  only  for  their  own  corporate  uses, 
but  for  furnishing  light  to  citizens,  and  the  average 
price  of  gas  furnished  to  the  citizen,  with  a  profit,  too, 
to  the  municipalities  is  fifty-four  cents  per  thousand. 
In  this  country,  too.  a  large  number  of  cities  own 
their  gas  plants.  ...  A  large  and  increasing  num- 
ber of  cities  and  towns  (already  over  200)  in  the 
United  States,  own  their  electric  lighting  plants,  with 
the  result  that  the  cost  to  the  municipalities,  from 
official  reports,  is  less  than  one-third  of  the  average 
cost  in  cities  buying  their  lights  from  private  compa- 
nies.     The    number   of    cities    in    this    country    owning 


§  579  PUBLIC   UTILITIES.  646 

their  water-works  is  1690  out  of  a  total  of  3196  hav- 
ing- water  supply;  and  municipal  ownership  is  steadily 
increasing.  In  the  fifty  largest  cities  in  the  Union, 
nineteen  have  recently  changed  from  private  owner- 
ship to  municipal  ownership,  leaving  only  nine  of  the 
fifty  which  are  still  dependent  for  their  water  supply 
on  private  companies.  .  .  .  The  general  movement 
of  the  age  in  which  we  live  is  towards  the  ownership 
and  operation  of  these  franchises  by  the  people  of 
towns  and  cities,  for  themselves,  through  the  agency 
of  their  municipal  corporations,  as  one  of  the  recog- 
nized and  chief  purposes  of  town  and  city  charters." 

This  decision  has  been  quoted  from  at  length  for 
its  statistical  value  especially,  and  for  its  conclusions 
which  seem  to  be  based  upon  an  extensive  investiga- 
tion of  the  question.  The  facts  speak  for  themselves 
and  indicate  that  the  municipal  ownership  of  the  plants 
providing  these  public  utilities  in  towns  and  cities 
was  widely  established  at  the  time  of  the  writing  of 
this  opinion,  and  that  the  tendency  as  indicated  by 
such  facts  is  toward  a  rapid  increase  of  such  owner- 
ship. 

In  the  decisions  of  the  courts  in  connection  with 
this  subject  no  suggestion  is  found  indicative  of  any- 
thing but  the  utmost  confidence  in  the  principles  in- 
volved, nor  are  any  reasons  assigned  for  denying  their 
broadest  application  in  practice.  And  the  attitude  of 
the  courts  on  such  a  subject,  it  is  believed,  gives  the 
most  conservative  and  accurate  indication  of  the  ten- 
dency of  the  times  and  of  the  probable  solution  of  the 
question. 

§  579.     Municipal  ownership  and  interests  o£  public. 

— That  the  public  interests  are  best  conserved  by  mu- 
nicipal ownership  is  fully  recognized  and  characteris- 
tically  expressed  by  the   court   in   the   case   of   Ogden 


I 


647  MUNICIPAL    OWNERSHIP.  §  580 

City  V.  Bear  Lake,  &c.,  Waterworks  Co.,  i6  Utah  440, 
52  Pac.  697,  41  L.  R.  A.  305,  to  the  effect  that,  "the 
people  usually  get  fleeced  when  the  city  places  its 
waterworks  in  the  hands  of  private  parties.  Public- 
spirited  men  are  not  at  all  times  free  from  the  undue 
influence  of  self-interest."  But  whether  the  munici- 
pality finds  that  the  amount  of  control  necessary  in 
any  case  requires  the  municipal  ownership  of  the 
plants  which  provide  it  and  its  citizens  with  these 
public  utilities,  or  only  the  ownership  without  the 
operation  by  the  public,  or  merely  the  statutory  reg- 
ulation of  private  plants,  it  is  submitted  on  the  author- 
ities herein  given  that  the  attitude  of  our  courts  favors 
a  decided  increase  in  the  sphere  of  municipal  activity. 

§  580.  Policy  of  municipal  ownership  legislative 
not  judicial  question. — The  policy  of  municipal  owner- 
ship and  the  expediency  of  its  adoption  in  any  partic- 
ular case  is  a  legislative  or  business  question  which 
the  municipal  authorities  must  decide  in  the  course  of 
their  administration  of  the  municipal  affairs  within 
the  authority  conferred  upon  the  city.  It  is  not  a 
judicial  question  nor  will  the  courts  review  the  wis- 
dom or  expediency  of  the  adoption  of  the  policy  of 
municipal  ownership,  but  will  confine  themselves  to 
the  question  of  the  authority  of  the  municipality  to  do 
so.  In  sustaining  an  option  of  the  appellant  munici- 
pality to  purchase  the  property  and  franchise  rights 
of  a  municipal  public  utility  and  in  upholding  the 
transfer  of  its  option  to  another  municipal  pubHc 
utility  where  the  effect  of  exercising  and  transferring 
the  option  was  intended  for  the  public  benefit,  the 
court  in  the  case  of  Indianapolis  v.  Consumers'  Gas 
Trust  Co.,  144  Fed.  640,  decided  in  1906,  said:  "In 
none  of  the  citations,  state  or  general,  are  there  any 
reasons   stated  that   seem   inconsistent   \vith   the   prop- 


§  581  PUBLIC   UTILITIES.  648 

osition  that  a  corporation,  engaged  in  a  service  of 
public  utility,  may  contract  for  a  sale  to  the  munici- 
pality of  all  of  its  property  therein,  either  through 
a  condition  accepted  in  the  franchise  from  the  city, 
or  through  subsequent  arrangement.  The  question 
whether  municipal  ownership  is  favorable  to  the  pub- 
He  interest,  is  neither  involved  in,  nor  open  to,  judicial 
inquiry.  Assuming  that  such  ownership  is  authorized, 
and  is  contemplated  or  demanded  by  the  municipality, 
we  are  convinced  that  this  proviso,  treated  alone  as 
a  contract  of  sale  on  the  part  of  the  gas  company, 
is  not  within  the  inhibition  of  the  rule — not  ultra 
vires.  The  public  policy  which  is  mentioned  in  the 
cases  cited,  as  opposed  to  an  implication  of  charter 
power  to  turn  over  its  property  to  another  and  'ab- 
negate the  performance  of  its  duties  to  the  public,' 
has  no  application  to  the  transfer  to  the  public — the 
municipahty — of  property  used  in  public  service."  The 
United  States  Supreme  Court  sustained  this  decision 
by  refusing  to  consider  it  on  a  writ  of  certiorari, 
October  29,    1906. 

§  581.  Sale  to  municipality  without  statutory  au- 
thority.— This  distinction  is  supported  by  the  common 
observation,  made  by  this  court,  which  is  here  recog- 
nized and  given  the  effect  of  law,  that  the  public  in- 
terests in  public  utility  plants  are  so  much  more  secure 
when  controlled  by  public  than  by  private  capital  that 
an  agreement  of  a  public  or  quasi-public  corporation 
to  sell  to  the  one  may  be  allowed,  in  the  absence  of 
express  statutory  authority,  while  the  law  refuses  to 
permit  such  an  agreement  to  stand  when  made  with 
private  parties.  This  must  be  the  chief  consideration 
for  upholding  the  options  to  purchase  such  plants, 
which  are  now  so  commonly  taken  by  the  municipality 
when   granting  franchises.     And  such   a  precaution   is 


649  MUNICIPAL    OWNERSHIP.  §  582 

a  very  wise  one  for  the  city  to  take,  for  it  provides 
the  opportunity  for  the  municipality  at  any  time  to 
take  over  such  property  and  control  it  absolutely  for 
the  public  benefit.  And  while  experience  shows  that 
this  action  is  often  necessary,  the  fact  that  it  can  be 
done  so  summarily  acts  as  an  important  factor  in 
forcing  public  consideration  into  the  service  rendered 
by  the  private  concern. 

§  582,  Extension  of  sphere  of  municipal  activity 
necessary. — The  power  of  the  municipality  to  own  and 
operate  its  municipal  public  utilities  as  well  as  the 
favorable  attitude  of  the  courts  in  extending  the 
sphere  of  municipal  activity  in  this  connection  is  well 
illustrated  by  decisions  from  the  Supreme  Court  of 
New  York.  In  the  case  of  Sun  Printing  &  Publishing 
Assn.  v.  New  York,  152  N.  Y.  257,  46  N.  E.  499,  8 
App.  Div.  (N.  Y.)  230,  37  L.  R.  A.  788,  decided  in 
1897,  where  the  action  was  to  restrain  the  defendants 
from  constructing  a  rapid  transit  system  for  the  city 
of  New  York  pursuant  to  statutory  provisions  to  that 
effect,  the  court  upheld  the  constitutionality  of  the 
statute  and  the  right  of  the  city  pursuant  to  its  pro- 
visions to  construct  such  a  rapid  transit  system  for  the 
reason  that  it  was  a  "city  purpose"  properly  included 
within  the  terms  of  the  constitution  providing  that 
"nor  shall  any  such  county,  city,  town  or  village  be 
allowed  to  incur  any  indebtedness  except  for  county, 
city,  town  or  village  purposes."  In  this  liberal  con- 
struction of  the  power  of  the  municipality  the  court 
was  evidently  influenced  by  the  fact  that  the  munici- 
pality had  failed  in  its  attempt  to  induce  private  cap- 
ital to  undertake  the  construction  and  operation  of 
such  a  rapid  transit  system  which  the  court  found  to 
be  absolutely  necessary  for  the  common  good  and  the 
general   welfare    of   the    inhabitants    of   the    defendant 


§  583  PUBLIC    UTILITIES.  65O 

municipality.  In  providing  for  the  construction  of 
such  a  system  by  the  municipaHty  itself  the  statute 
stipulated  that  if  the  system  should  be  constructed  at 
the  expense  of  the  municipality  it  should  "be  deemed 
to  be  a  part  of  the  public  streets  and  highways  of  said 
city." 

§  583.  Practical  necessity  long  recognized  as  basis 
of  municipal  ownership. — In  the  course  of  its  opinion 
following  the  decision  of  the  case  of  People  ex  rel. 
Murphy  v.  Kelly,  76  N.  Y.  475,  in  sustaining  the  power 
of  the  cities  of  New  York  and  Brooklyn  to  construct 
the  Brooklyn  bridge  connecting  their  respective  ter- 
ritory at  their  joint  expense,  which  this  court  at  that 
early  date  held  to  be  a  city  purpose,  the  court  in  the 
case  in  question  recognizing  the  practical  phases  of 
the  matter  said:  "The  situation,  however,  in  the  city 
of  New  York,  is  most  peculiar.  A  long,  narrow 
island  lies  between  two  rivers,  so  narrow  in  places 
that  there  are  practically  but  two  or  three  streets 
through  which  the  masses  must  reach  its  business 
center.  The  population  of  the  city  during  the  last 
half  century  has  increased  from  three  hundred  thou- 
sand to  over  a  million  and  a  half  of  people.  The 
travel  upon  its  existing  railroads  during  the  last  twenty 
years  has  increased  from  150,000,000  in  1874  to  up- 
wards of  448,000,000  in  1894.  It  was  conceded  upon 
the  argument  that  the  crowded  and  congested  condi- 
tion of  the  travel  upon  the  streets  in  the  city  renders 
the  proposed  structure  necessary.  These  considera- 
tions have  induced  us  to  give  to  the  provisions  of  the 
act  a  most  liberal  construction.  The  commissioners 
located  the  road,  and  tried  to  induce  private  capital 
to  construct  and  operate  it.  In  this  they  have  failed, 
and  the  situation  is  such  that  the  city  must  itself 
construct  the  road,  or  go  without  it.     Here  we  have 


? 


651  MUNICIPAL    OWNERSHIP.  ,  §  584 

a  demand  for  a  great  public  highway,  which  private 
enterprise  and  capital  will  not  construct.  It  is  neces- 
sary for  the  welfare  of  the  people,  and  is  required  by 
them.  It  is  public  in  character,  and  is  authorized  by 
the  legislature.  Our  conclusion  is  that,  under  the 
circumstances  and  situation  here  presented,  the  pro- 
posed road  may  properly  be  held  to  be  'for  a  city 
purpose,'  and  that  the  acts  are  not  in  contravention 
of  the  provisions  of  the   constitution." 

§  584.     Ownership   without   operation  permitted. — 

This  case  was  expressly  sustained  and  the  principle 
extended  in  its  application  in  the  case  of  Admiral 
Realty  Co.  v.  New  York,  206  N.  Y.  no,  99  N.  E.  241, 
decided  June  29,  1912,  where  the  court  permitted  the 
municipality  not  only  to  construct  at  its  own  expense 
a  rapid  transit  system,  but  to  lease  it  to  private  capital 
to  be  operated  in  connection  with  a  system  owned  by 
the  lessee  for  the  purpose  of  securing  a  uniform  con- 
tinuous system  of  transfers  for  its  inhabitants.  In 
the  course  of  this  very  practical  and  progressive  deci- 
sion the  court  said:  "The  question  whether  the  city 
may  make  this  arrangement  with  the  Interborough 
Company  seems  to  resolve  itself  into  the  fundamental 
inquiry  whether  a  municipality,  having  made  a  con- 
tract, may  subsequently  bargain,  under  full  legislative 
authority,  for  a  modification  of  that  contract,  so  that 
it  will  be  adjustable  to  altered  and  then  existing  cir- 
cumstances, paying  an  adequate  consideration,  either 
for  what  the  other  party  gives  up,  or  for  what  it 
secures  under  the  modifications.  It  seems  to  me 
obvious  that  a  municipality  has  such  power. 
For  if  it  be  once  decided  that  the  municipality  has 
the  right  to  bargain  with  the  Interborough  Company 
for  a  modification  of  the  latter's  lease  of  the  old  sub- 
ways,  so   as   to  bring  them   into   a  unified   system   of 


§  585  PUBLIC    UTILITIES.  '  652 

transportation  with  the  new  ones,  the  consideration 
to  be  paid  for  such  modification,  in  the  absence  of 
fraud  or  collusion,  which  is  not  charged,  rests  in  the 
discretion  and  judgment  of  the  public  officials;  and 
certainly,  as  observed  before,  it  is  not  objectionable 
that,  instead  of  burdening  the  municipality  with  more 
rapid  and  oppressive  methods  of  payment,  it  is  pro- 
vided that  this  consideration  shall  be  paid  from  year 
to  year  out  of  the  earnings  of  the  railroads.  .  .  . 
The  city  will  own  all  the  subways  which  are  to  be 
operated  together.  It  is  true  that  at  present  the  Inter- 
borough  Company  has  a  separate  interest  in  some  of 
them  as  lessee.  But  by  the  proposed  contract  this 
lease  is  to  be  modified  and  superseded  by  a  new  agree- 
ment, whereby  the  city  becomes  reinvested  with  a 
substantial  control  thereof,  and  relets  them,  in  con- 
nection with  its  new  subways,  under  one  contract  for 
operation  as  a  single  and  entire  system.  .  .  .  And 
the  question  is  whether  the  municipality,  instead  of 
building  subways  at  an  enormous  expense  over  the 
entire  territory,  may  build  them  in  part  of  it,  and 
then  make  a  contract  for  their  operation  with  the 
owner  of  the  privately  owned  system,  under  which 
the  latter  agrees  to  operate  its  system  in  conjunction 
with  the  subways,  and  subject  to  a  single  fare.  It 
seems  to  me  that  it  may  thus  do;  and  that  the  state- 
ment of  the  proposition  very  largely  supplies  the 
argument  in  its  favor." 

§  585.  Constitutionality  of  municipal  ownership 
unquestioned. — The  constitutionality  of  the  statutory 
enactments  of  New  York  just  discussed  and  the  right 
of  New  York  City  pursuant  to  such  statutory  enact- 
ments to  construct,  maintain  and  operate  a  rapid 
transit  system  on  the  theory  that  it  is  a  necessary 
municipal  purpose  is  expressly  sustained  and  approved 


653  MUNICIPAL    OWNERSHIP.  §  585 

by  the  court  in  the  case  of  Underground  R.  R.  v.  New 
York,  116  Fed.  952,  decided  in  1902,  where  the  court 
said:  "The  acts  of  defendants  commissioners,  under 
the  rapid  transit  act,  can  not  be  construed  to  confer 
upon  complainant  any  right  or  authority  to  construct 
an  underground  railroad  specifically  mentioned  in 
the  act.  By  the  provisions  of  the  rapid  transit  act, 
the  privilege  and  franchise  is  to  be  sold  at  public 
auction  to  a  corporation  organized  and  existing  under 
that  act.  The  averred  unconstitutionality  of  the  rapid 
transit  act  and  the  invalidity  of  the  contract  entered 
into  by  the  defendants  for  the  many  reasons  assigned 
in  the  bill  seem  to  be  sufficiently  answered  by  the 
decision  of  the  court  of  appeals  of  the  state  of  New 
York  in  Sun  Printing  &  Publishing  Assn.  v.  City  of 
New  York,  152  N.  Y.  257,  46  N.  E.  499,  37  L.  R.  A. 
788.  The  constitutionality  of  the  rapid  transit  act  is 
there  established.  The  decision,  being  that  of  the 
highest  tribunal  of  the  state,  is  controlling  upon  this 
court.  Adams  Express  Co.  v.  Ohio.  165  U.  S.  219, 
41  L.  ed.  683.  It  falls  within  the  general  rule  that 
the  construction  of  the  state  courts  of  last  resort  of 
state  constitutions  and  statutes  will  ordinarily  be 
accepted  by  the  courts  of  the  United  States  as  con- 
trolling. ...  As  before  stated,  the  act  in  terms 
authorizes  the  rapid  transit  board  to  contract  'with 
any  person,  firm  or  corporation  which  in  the  opinion 
of  the  board  shall  be  best  qualified  to  fulfill  and  carry 
out  such  contract,  for  the  construction  of  such  road  or 
roads  upon  the  routes  and  in  accordance  with  the 
plans  and  specifications  so  adopted,  for  such  sum  or 
sums  of  money,  to  be  raised  and  paid  out  of  the 
treasury  of  said  city,  as  hereinafter  provided,  and  on 
such  terms  and  conditions  not  inconsistent  with  the 
aforesaid  plans  and  specifications  as  said  board  shall 
determine  to  be  best  for  the  public  interest.'     Section 


§  585  PUBLIC   UTILITIES.  654 

34.  No  particular  person,  class  of  persons,  or  corpora- 
tion is  excluded  from  the  privilege  of  contracting  for 
the  construction  and  operation  of  the  proposed  rail- 
road. All  may  compete."  This  decision  was  sustained 
on  appeal  by  the  Supreme  Court  of  the  United  States 
in  193  U.  S.  416,  48  L.  ed.  733. 


1 


CHAPTER  XXIX. 

MUNICIPAL  BUREAUS  OR  COMMISSIONS. 


Section. 

5S6.  Strict  enforcement  of  franchise  and  contract  rights  essentiaL 

587.  Means  of  enforcing  rights — Information  necessary. 

588.  Enforcement   by   legal   proceedings   no   longer   adequate. 

589.  Relief  by  legislative  enactment  aside  from  commissions. 
690.  Popular  control  by  public  generally  impracticable. 

591.  Public  utility  commissions  adequate  and  practically  necessary, 

592.  Relief  summary,  adequate  and  inexpensive. 

593.  Matter  of  business  administration  by  experts. 

594.  Business  of  municipal  public  utilities  and  politics  distinguished. 

595.  Concentration  of  power  and  responsibility. 

596.  Commission  constitutional  and  entirely  legal. 

597.  Commission  a  practical  business  necessity. 

598.  Relief  at  hands  of  courts  practically  impossible. 

599.  Reasonable  rates  required  at  common  law  and  by  statute. 

600.  Tendency  toward  "home  rule"  of  local  matter. 

601.  Municipal  franchise  bureau  or  commission  necessary. 


§  586.  Strict  enforcement  of  franchise  and  contract 
rights  essential. — Consistent  and  intelligent  enforce- 
ment of  franchise  rights  and  of  the  power  to  regulate 
and  control  the  municipal  public  utility  is  of  equal 
importance  to  securing  the  proper  franchise  provisions 
and  the  necessary  statutory  authority  to  permit  the 
municipality  to  regulate  and  control  the  municipal 
public  utility.  The  fearless  and  persistent  enforcement 
by  the  municipality  of  its  rights  in  securing  ade- 
quate and  complete  service  from  the  municipal  public 
utility  at  a  fair  and  uniform  rate  is  just  as  essential, 
if  not  even  more  necessary,  than  providing  the  neces- 
sary power  and  authority  for  giving  the  municipality 
the  right  to  require  such  service  for  itself  and  its  inhab- 
655 


§  5^7  PUBLIC    UTILITIES.  656 

itants  and  to  control  the  rates  of  the  municipal  public 
utility.  The  strict  and  impartial  enforcement  of  the 
law  and  of  the  franchise  or  contract  rights  available 
to  the  municipality  is  essentially  necessary  if  it  is  to 
receive   satisfactory   service    at   a   fair   uniform   rate. 

§  587.  Means  of  enforcing  rights — Information 
necessary. — The  methods  or  means  by  which  such 
powers  may  be  enforced  and  the  rights  conferred 
thereby  secured  are  by  legal  proceedings,  legislative 
enactment,  action  by  the  people  themselves  or  by 
public  utility  commissions.  Regardless  of  the  means 
employed  it  is  always  first  necessary  to  have  com- 
plete and  accurate  information  as  to  the  power  of 
the  municipality  to  regulate  the  giving  of  the  service 
and  the  rates  by  virtue  of  its  franchise  or  contract 
rights  or  statutory  provisions;  and  next  to  determine 
the  extent  and  the  necessity  of  the  investment  of  the 
municipal  public  utility  to  give  the  desired  service  as 
well  as  the  expense  of  its  maintenance  and  operation, 
the  schedule  of  rates  and  other  rules  and  regulations 
for  furnishing  the  service  and  all  matters  connected 
with  the  operation  of  the  plant  and  the  administration 
of  the  affairs  of  the  municipal  public  utility,  including 
a  complete  understanding  of  the  system  of  accounting 
and  of  all  merger  or  consolidation  agreements;  and 
finally  a  uniform  scientific  system  of  accounting  is 
essential  as  the  basis  for  determining  the  amount  of 
the  investment  and  of  a  reasonable  capitalization  and 
rate  of  return  for  it. 

§  588.  Enforcement  by  legal  proceedings  no  longer 
adequate. — The  enforcement  of  all  these  rights  for 
the  purpose  of  securing  the  service  to  which  the  mu- 
nicipality and  its  inhabitants  are  entitled  at  a  fair 
uniform    rate    by    a    resort    to    legal    proceedings    has 


657  MUNICIPAL    BUREAUS.  §  589 

until  recently  been  practically  the  only  efficient  method 
available.  Although  the  relief  secured  in  this  way  has 
generally  been  efficient  it  has  necessarily  been  attended 
by  large  expenditures  of  money,  and  in  many  cases 
final  relief  has  been  very  much  delayed  while  in  the 
meantime  all  parties  interested  have  been  subjected 
to  much  inconvenience  and  expense.  Relief  at  the 
hands  of  the  courts  is  in  a  sense  only  retroactive  and 
personal,  being  limited  to  past  transactions  and  to  the 
parties  to  the  action  and  is  not  comprehensive  of  all 
parties  interested.  The  nature  and  the  extent  of  the 
investigation  necessary  to  the  decision  of  matters  con- 
nected with  the  giving  of  satisfactory  service  at  the 
proper  rate  makes  relief  at  the  hands  of  the  court 
practically  impossible  because  of  the  large  and  con- 
stantly increasing  number  of  such  cases  arising  and 
of  the  already  overcrowded  dockets  of  our  courts. 

Adequate  regulation  must  anticipate  future  con- 
ditions and  provide  present  and  prospective  relief 
rather  than  the  adjustment  of  the  rights  of  parties 
based  on  past  transactions.  The  expense  of  time  and 
money  necessary  to  secure  relief  in  such  cases  at  the 
hands  of  the  courts  is  prohibitive  to  most  consumers 
of  such  service  whose  interest  alone  does  not  justify 
their  expenditure  of  the  necessary  time  and  money 
to  secure  the  relief  to  which  they  are  entitled.  This 
method  is  extravagant  to  the  municipal  public  utility 
itself  as  well  as  to  the  customer,  and  it  is  now  gen- 
erally conceded  by  all  concerned  to  be  inadequate  for 
their  needs. 

§  589.  Relief  by  legislative  enactment  aside  from 
commissions. — Relief  by  legislative  enactment,  as  dis- 
tinguished from  the  delegation  by  the  state  to  the 
municipality  or  a  public  utility  commission,  can  not  in 
its  very  nature  be  satisfactory  or  sufficient  because  of 

42— Pub.  ut. 


§  590  PUBLIC   UTILITIES.  658 

the  infrequency  of  the  sessions  of  the  legislature  and 
of  the  increasing  demands  upon  the  limited  time  avail- 
able for  its  action.  Nor  can  such  a  method  suffice  for 
the  further  reason  that  general  legislation  with  refer- 
ence to  municipal  public  utilities  involving  so  many- 
details  and  having  so  many  circumstances  peculiar  to 
each  particular  case  can  not  fairly  or  completely  regu- 
late the  matter.  The  details  of  administration  and 
the  varying  conditions  prevailing  in  different  localities 
renders  general  legislation  on  such  matters  entirely  in- 
sufficient, necessitating  their  delegation  to  local  au- 
thority or  to  a  commission  w^hich  can  always  enter- 
tain a  complaint  and  grant  summary  relief;  for  as  the 
court  in  the  case  of  Capital  City  Gas  Co.  v.  Des 
Moines,  72  Fed.  818,  says:  "Necessarily,  and  because 
of  the  great  variety  and  large  number  of  differing 
circumstances  which  enter  into  the  local  situations 
of  the  cities  in  the  state,  a  general  statute,  fixing  the 
price  of  gas,  could  scarcely  be  so  drawn  as  satisfac- 
torily to  adapt  itself  to  each  city;  and  therefore,  for 
convenience  of  exercise  of  power  to  fix  rates,  as  well, 
perhaps,  as  to  permit  the  rates  to  be  fixed  with  greater 
flexibility,  and  with  more  special  reference  in  what 
local  situations  might  require,  the  general  assembly 
delegated  this  power  to  fix  these  rates  to  the  several 
municipal  corporations,  to  be  exercised  through  their 
respective  city  councils.  That  this  delegation  was  a 
valid  exercise  of  legislative  power  is  conceded  by 
council  herein." 

§  590.  Popular  control  by  public  generally  imprac- 
ticable.— That  general  legislation  is  entirely  inade- 
quate as  a  method  of  regulating  and  controlling  mu- 
nicipal public  utilities  is  evidenced  by  the  common 
practice  of  delegating  a  constantly  increasing  portion 
of  these  affairs  to  the  particular  municipality  or  to  a 


659  MUNICIPAL   BUREAUS.  §  59I 

specially  constituted  commission  created  for  that 
purpose  and  equipped  with  the  necessary  technical 
knowledge  and  comparative  information  to  make  a 
prompt  and  accurate  investigation  and  disposition  of 
the  questions  as  they  arise. 

That  the  people  themselves  as  citizens  of  the  state 
or  inhabitants  of  the  particular  municipality  will  not 
give  the  matter  the  necessary  attention,  and  because  of 
their  lack  of  organization  and  of  technical  information 
and  practical  experience,  that  they  could  not  attend  to 
it  satisfactorily  if  they  would  is  proven  conclusively  by 
experience  and  common  observation.  Responsibility  of 
this  sort  must  be  personalized  in  order  to  get  the  neces- 
sary attention  and  the  business  of  the  modern  municipal 
public  utility  is  entirely  too  elaborate  and  technical  in 
its  nature  for  every  one  to  investigate  and  understand 
sufficiently  to  insure  accuracy  and  fairness  in  the  dis- 
position of  the  matter.  In  the  very  nature  of  the 
questions  involved  and  in  the  light  of  past  experience 
it  must  be  self-evident  that  popular  control  of  munici- 
pal public  utilities  by  all  who  may  be  interested  in 
either  receiving  or  furnishing  the  service  can  not  suc- 
ceed but  that  the  matter  must  be  placed  in  the  hands 
of  trained  unbiased  experts  of  the  same  ability  and  in- 
tegrity as  those  in  charge  of  the  municipal  public  util- 
ity itself. 

§  591.  Public  utility  commissions  adequate  and 
practically  necessary. — The  public  utility  commission 
is  the  latest  and  apparently  the  ultimate  form  of  secur- 
ing adequate  and  intelligent  regulation  and  is  attended 
with  the  least  possible  expenditure  of  money  and  time 
necessary  to  secure  the  desired  results.  A  public  util- 
ity commission  established  by  the  state  or  a  municipal 
commission  or  bureau  created  pursuant  to  authority 
conferred  upon  the  municipality  by  the  state  for  that 


§  592  PUBLIC    UTILITIES.  66c 

purpose  is  a  permanent  administrative  body  of  trained 
experts  whose  services  are  always  available  for  the 
purpose  of  investigating  and  adjusting  the  conflicting 
rights  and  liabilities  that  are  necessarily  constantly 
arising  between  the  opposing  parties  involved  in  fur- 
nishing and  using  any  municipal  public  utility  service. 
The  members  of  such  a  commission  are  not  only  spe- 
cially trained  for  this  service  but  they  give  it  their 
exclusive  attention,  and  the  information  secured  in 
connection  with  the  investigations  and  adjustments 
made  in  the  course  of  a  few  years  furnishes  the  neces- 
sary technical  data  in  detail  which,  when  properly 
classified  by  the  commission,  constitutes  the  basis  for 
the  investigation  and  adjustment  of  any  question  aris- 
ing in  any  particular  municipal  public  utility  at  a  com- 
paratively nominal  expense. 

§  592.     Relief  summary,  adequate  and  inexpensive. 

— With  the  information  secured  as  the  result  of  the 
investigations  and  adjustments  made  by  the  com- 
mission and  classified  it  is  possible  to  make  the  proper 
disposition  of  any  case  promptly  when  it  arises  in  the 
light  of  the  information  which  the  commission  already 
has  on  hand  at  a  relatively  slight  expense  and  much 
more  expeditiously  than  by  resort  to  the  courts.  It 
is  a  question  of  business  administration  rather  than 
a  judicial  one  whose  adjustment  requires  not  only  ac- 
curate technical  information  but  the  enforcement  of 
the  rights  of  the  particular  case  as  well  as  all  similar 
ones  arising  any  time  thereafter  in  order  that  the 
rights  belonging  respectively  to  each  party  may  be 
always   secured. 

§  593.  Matter  of  business  administration  by  ex- 
perts.— The  fact  that  a  franchise  is  not  self-enforcing 
and    that    statutory    provisions    for    the    regulation    of 


66l  MUNICIPAL    BUREAUS.  §  594 

municipal  public  utility  service  are  not  self-executing 
furnishes  ample  justification  for  a  public  utility  com- 
mission. Being  a  matter  of  business  administration 
the  commission  which  is  composed  of  trained  business 
experts  along  this  particular  line  not  only  furnishes  the 
best  and  most  efficient  method  for  regulating  the  busi- 
ness but  also  by  separating  it  from  other  municipal 
affairs  and  political  considerations  thereby  relieves  it 
of  the  greatest  practical  difficulty  which  now  generally 
attends  the  administration  of  such  business  matters 
by  the  ordinary  municipal  officer  who  is  selected  by  a 
political  party,  and  because  of  the  manner  of  his 
selection  and  the  short  term  of  his  service  can  not  be 
nor  become  an  expert  on  the  subject. 

§  594.  Business  of  municipal  public  utilities  and 
pohtics  distinguished. — With  the  business  of  municipal 
public  utilities  placed  in  the  hands  of  such  a  non-parti- 
san permanent  commission  of  capable  men  specially 
trained  for  rendering  such  service,  these  very  im- 
portant and  extensive  business  interests,  in  which 
every  inhabitant  of  the  municipality  as  well  as  the 
municipality  itself  is  vitally  interested,  would  be  sepa- 
rated from  political  matters  and  party  politics  which 
are  now  all  too  often  controlled  by  and  in  the  interest 
of  those  in  charge  of  the  municipal  public  utilities. 
Whether  other  municipal  affairs  are  matters  of  busi- 
ness rather  than  politics,  there  can  be  no  question  but 
that  all  matters  of  municipal  public  utilities  are  busi- 
ness questions  and  not  political  ones  which  accordingly 
can  only  be  properly  disposed  of  in  a  business  way  and 
by  men  especially  informed  and  experienced  in  such 
affairs  rather  than  by  municipal  officers  selected  by 
political  parties  for  a  short  term  of  service.  There  is 
no  more  justification  for  expecting  satisfactory  and 
efficient  administration  of  municipal  public  utility  af- 
fairs at  the  hands  of  municipal  officers  who  are   thus 


§  595  PUBLIC   UTILITIES.  662r 

selected  at  such  frequent  intervals  than  would  be  the 
case  in  the  affairs  of  any  large  business  concern,  for 
both  alike  require  capable  experienced  men  specially- 
trained  and  permanently  in  charge  of  the  regulation 
or  administration  of  such  concerns. 

§  595-     Concentration  of  power  and  responsibility. 

— The  most  convenient  and  efficient  method  of  regu- 
lating and  controlling  municipal  public  utility  services 
is  by  an  administrative  body  having  all  the  necessary 
power  to  regulate  the  service  with  that  duty  and  re- 
sponsibility imposed  by  the  grant  of  such  power.  The 
nature  and  extent  of  the  power  which  such  a  com- 
mission or  bureau  has  depends  entirely  upon  the 
statutory  provisions  creating  it,  and  while  such  power 
may  be  merely  advisory  the  situation  generally  re- 
quires authority  to  dictate  and  enforce  as  well  as  to 
advise. 

§  596.  Commission  constitutional  and  entirely 
legal. — That  an  administrative  body  in  the  form  of  a 
commission  or  bureau  is  constitutional  and  a  practical 
business  necessity  has  been  fully  recognized  by  all  the 
courts  which  have  been  called  upon  to  construe  such 
statutory  enactments,  and  in  their  decisions  they  have 
fully  recognized  the  necessity  for  such  administrative 
bodies. 

Among  the  first  of  these  decisions  to  conceive  the 
necessity  for  such  a  method  of  regulating  the  modern 
municipal  public  utility  service  is  the  case  of  Stone  v. 
Farmers  Loan  and  Trust  Co.,  116  U.  S.  307,  29  L.  cd. 
636,  commonly  known  as  the  Railroad  Commission 
Cases,  where  the  right  to  regulate  the  furnishing  of 
such  service  and  to  fix  the  reasonable  rate  for  it 
through  a  commission  created  by  the  state  for  that 
purpose  is  fully  and  frankly  recognized  and  approved: 


663  MUNICIPAL    BUREAUS.  §  596 

The  same  court  in  the  case  of  Reagan  v.  Farmers 
Loan  and  Trust  Co.,  154  U.  S.  362,  38  L.  ed.  1014. 
decided  in  1894,  supplementing  the  decision  of  this 
court  in  the  railroad  commission  cases  spoke  as  fol- 
lows: "Passing  from  the  question  of  jurisdiction  to 
the  act  itself,  there  can  be  no  doubt  of  the  general 
power  of  a  state  to  regulate  the  fares  and  freights 
which  may  be  charged  and  received  by  railroad  or 
other  carriers,  and  that  this  regulation  can  be  carried 
on  by  means  of  a  commission.  Such  a  commission  is 
merely  an  administrative  board  created  by  the  state 
for  carrying  into  effect  the  will  of  the  state  as  ex- 
pressed by  its  legislation.  Stone  v.  Farmers  Loan  & 
T.  Co.  (Railroad  Commission  Cases)  116  U.  S.  307, 
29  L.  ed.  636.  No  valid  objection,  therefore,  can  be 
made  on  account  of  the  general  features  of  this  act; 
those  by  which  the  state  has  created  the  railroad  com- 
mission and  entrusted  it  with  the  duty  of  prescribing 
rates  of  fares  and  freights  as  well  as  other  regula- 
tions for  the  management  of  the  railroads  of  the  state. 
.  .  .  It  is  doubtless  true,  as  a  general  proposition, 
that  the  formation  of  a  tariff  of  charges  for  the  trans- 
portation by  a  common  carrier  of  persons  or  property 
is  a  legislative  or  administrative  rather  than  a  judicial 
function.  Yet  it  has  always  been  recognized  that,  if 
a  carrier  attempted  to  charge  a  shipper  an  unreason- 
able sum,  the  courts  had  jurisdiction  to  inquire  into 
that  matter  and  to  award  to  the  shipper  any  amount 
exacted  from  him  in  excess  of  a  reasonable  rate,  and 
also  in  a  reverse  case  to  render  judgment  in  favor  of 
the  carrier  for  the  amount  found  to  be  a  reasonable 
charge.  The  province  of  the  courts  is  not  changed, 
nor  the  limit  of  judicial  inquiry  altered,  because  the 
legislature  instead  of  the  carrier  prescribes  the  rates. 
The  courts  are  not  authorized  to  revise  or  change  the 
body  of  rates  imposed  by  a  legislature   or  a   commis- 


§  597  PUBLIC    UTILITIES.  664 

sion;  they  do  not  determine  whether  one  rate  is  pre- 
ferable to  another,  or  what  under  all  circumstances 
would  be  fair  and  reasonable  as  between  the  carriers 
and  the  shippers;  they  do  not  engage  in  any  mere  ad- 
ministrative work;  but  still  there  can  be  no  doubt  of 
their  power  and  duty  to  inquire  whether  a  body  of 
rates  prescribed  by  a  legislature  or  a  commission  is 
unjust  and  unreasonable,  and  such  as  to  work  a  prac- 
tical destruction  to  rights  of  property,  and  if  found 
so  to  be,  to  restrain  its  operation." 

§  597-     Commission  a  practical  business  necessity. 

— The  necessity  for  such  a  commission  in  order  to 
secure  the  proper  regulation  and  control  of  municipal 
public  utilities  is  frankly  recognized  and  accurately  ex- 
pressed in  the  very  practical  recent  decision  of  Des 
Moines  Gas  Co.  v.  Des  Moines,  199  Fed.  204,  decided 
Aug.  21,  1912,  where  the  court  says:  "This  litigation 
has  cost  both  the  gas  company  and  city  extravagantly 
large  sums,  most  of  which  can  not  be  taxed  as  costs, 
nor  recovered  back  by  the  party  successful  in  the 
end.  Much  of  this  kind  of  litigation,  and  practically 
all  of  the  expense,  would  be  avoided  if  Iowa,  like  so 
many  of  the  other,  including  some  neighboring,  states, 
had  an  impartial  and  city  nonresident  commission  or 
tribunal,  with  power  to  fix  these  rates  at  a  public  hear- 
ing, all  interested  parties  present,  with  the  tribunal 
selecting  its  own  engineers,  auditors,  and  accountants. 
Too  often  we  have  selfish,  partisan,  prejudiced,  and 
unreliable  experts  engaged  for  weeks  at  a  time,  at 
$100  or  more  and  expenses  per  day,  exaggerating 
their  importance,  and  making  the  successful  party  in 
fact  a  loser.  With  all  of  our  boasted  advancement, 
Iowa  is  a  laggard  in  this  matter,  and  will  continue  as 
such  until  these  rate  makings  are  taken  from  the  power 


665  MUNICIPAL   BUREAUS.  §  598 

of   city    councils.     Appeals   to   the   courts    will    seldom 
be  taken  from  the  findings  of  such  a  tribunal." 

§  598.  Relief  at  hands  of  courts  practically  im- 
possible.— That  the  courts  can  not  give  adequate  relief 
in  the  increasing  number  of  cases  involving  so  many 
details  of  business  administration  in  connection  with 
furnishing  municipal  public  utility  service  and  that  the 
commission  is  absolutely  essential  and  much  better 
fitted  for  giving  the  relief  is  indicated  in  the  case  of 
Saratoga  Springs  v.  Saratoga  Gas,  &c.,  Co.,  190  N. 
Y.  562,  191  N.  V.  123,  83  N.  E.  693,  18  L.  R.  A.  (N. 
S.)  713,  decided  in  1908,  where  the  court  says:  "That 
the  most  appropriate  method  (speaking  from  a  prac- 
tical, not  necessarily  constitutional,  point  of  view)  is 
the  creation  of  a  commission  or  body  of  experts  to 
determine  the  particular  rates,  has  been  said  several 
times  in  the  opinions  rendered  by  the  Supreme  Court 
of  the  United  States  in  the  various  railroad  commis- 
sion cases  and  in  those  of  state  courts.  While  no  con- 
sideration of  convenience  or  of  supposed  necessity 
would  justify  us  in  ignoring  any  constitutional  man- 
date or  limitation,  it  must  be  remembered  that  we  have 
no  express  constitutional  provision  on  the  subject,  and 
that  it  is  sought  to  condemn  the  legislation  before 
us  solely  by  extending  the  principle  that  the  legisla- 
ture can  not  delegate  legislative  powers,  a  principle 
which,  though  unquestionably  true,  is,  as  we  have 
seen,  true  only  within  limits  to  a  point  that  would 
render  efficient  legislation  on  the  subject  impracticable. 
It  can  not  be  said,  to  use  the  language  of  Justice 
Harlan,  that  in  any  real  sense  the  legislature  has 
delegated  its  power  to  the  commission.  The  statute 
is  complete.  The  legislature,  not  the  commission,  has 
enacted  that  there  shall  be  maximum  rates  for  the 
charges   of   the   gas   and   electric   light   companies,   and 


§  599  PUBLIC    UTILITIES.  666 

that  light  shall  be  furnished  to  consumers  at  those 
rates,  and  has  provided  the  penalty  for  extorting 
greater  charges  for  service.  What  is  intrusted  to  the 
commission  is  the  duty  of  investigating  the  facts,  and, 
after  a  public  hearing,  of  ascertaining  and  determining 
what  is  a  reasonable  maximum  rate.  I  can  not  see 
how  the  duty  intrusted  to  the  commission  in  this  case 
differs  in  principle  from  that  imposed  on  the  President 
to  determine  that  duties  were  reciprocally  unequal  or 
on  the  Secretary  of  the  Treasury  to  determine  what 
was  inferior  tea. 

§  599.  Reasonable  rates  required  at  common  law 
and  by  statute. — The  statute  provides  that  the  com- 
mission shall  fix  the  rate  within  the  limits  prescribed 
by  law.  This  includes  both  statute  and  common  law. 
There  may  have  been  companies  which  had  franchises 
immune  from  invasion  by  which  they  were  authorized 
to  charge  specific  rates.  The  common  law  prescribes 
the  rule  that  the  rate  shall  be  reasonable,  and  I  think, 
even  without  special  mention,  the  statute  would  neces- 
sarily imply  the  same  limitation.  But  it  is  said  that, 
granting  this,  'reasonable'  is  really  no  standard,  but  a 
mere  generality.  Again,  we  are  of  a  different  opinion. 
Indeed,  if  the  statute  assumed  to  fix  any  other  stand- 
ard for  rates  than  that  they  should  be  reasonable,  we 
think  it  would  be  much  more  open  to  attack  than  in 
its  present  form.  .  .  .  Any  other  standard,  unless 
'a  mere  generality,'  would  surely  be  challenged  as 
arbitrary." 

§  600.  Tendency  toward  "home  rule"  of  local  mat- 
ter.— As  municipalities  show  greater  ability  to  con- 
duct their  own  municipal  and  business  affairs  there  is 
a  general  tendency  to  permit  them  to  do  so.  This  is 
evidenced    by    recent    constitutional    provisions    in    a 


66/  MUNICIPAL   BUREAUS.  §  6oi 

number  of  states  granting  what  is  commonly  known 
as  "home  rule"  for  municipalities.  The  first  duty  of 
the  municipality  toward  properly  disposing  of  its  mu- 
nicipal affairs  so  far  at  least  as  they  are  concerned 
with  municipal  public  utilities  is  the  creation  of  a 
franchise  bureau  or  a  municipal  public  utility  commis- 
sion for  the  purpose  of  securing  complete  and  accurate 
information  concerning  the  franchise  or  contract  pro- 
visions of  its  municipal  public  utilities  and  all  other 
information  in  regard  to  their  investment,  maintenance 
and  operation;  and  whether  there  be  a  state  public 
utility  commission  or  not,  each  municipality  has  prob- 
lems peculiar  to  itself  and  should  have  complete  and 
accurate  information  in  regard  to  all  its  municipal 
public  utilities  as  well  as  an  administrative  body  com- 
posed of  capable  experienced  men  able  to  cope  with 
those  in  charge  of  the  affairs  of  the  municipal  public 
utility  itself  in  the  interest  of  the  public. 

§  60 1.  Municipal  franchise  bureau  or  commission 
necessary. — Such  a  bureau  or  commission  should  in- 
vestigate and  advise  the  municipal  authorities  on  all 
questions  of  franchise  rights  and  attend  to  their  en- 
forcement constantly  and  consistently  as  well  as  to 
the  service  rendered  by  the  company  and  the  reason- 
ableness of  the  rate  received  by  it  for  the  service,  for 
it  is  evident  that,  in  a  business  of  such  magnitude  with 
as  many  details  of  administration  and  technical  ques- 
tions involved  as  are  common  to  the  affairs  of  munici- 
pal public  utilities,  the  municipality  and  its  inhabitants 
can  only  be  in  position  to  secure  and  know  that  they 
are  receiving  proper  service  at  a  fair  uniform  rate  by 
the  employment  of  such  men  as  are  capable  of  in- 
vestigating such  questions  equally  with  the  ofTicers 
of  the  municipal  public  utility  itself. 


CHAPTER  XXX. 

STATE  PUBLIC   UTILITY   COMMISSIONS. 

Section. 

602.  State  public  utility  commission  necessary. 

603.  State  regulation  supplants  competition. 

604.  Indeterminate  franchise  properly  regulated. 

605.  State   control   of   capitalization   and   expenditures   essential. 

606.  Impartial  commission  of  experts  approved  by  courts. 

607.  Commission  required  by  importance  and  complexity  of  duty. 

608.  Franchise  provisions  and  matters  of  administration  described. 

609.  Monopoly  under  indeterminate  permit. 

610.  State  commissions  first  established. 

611.  Police  power  as  basis  for  regulation. 

€12.  Scope  of  activity  of  business  requires  state  commission. 

§  6o2.     State  public  utility  commission  necessary. 

— While  the  municipal  commission,  bureau  or  other 
administrative  department  of  the  municipality  is  of 
great  value,  the  expense  of  maintaining  a  properly 
equipped  commission  is  prohibitive  to  all  but  the 
large  municipalities  and  makes  necessary  state  public 
utility  commissions.  Many  municipal  public  utilities 
are  becoming  interurban  in  their  scope  and  are  no 
longer  local  to  the  particular  municipality  whose  juris- 
diction accordingly  is  not  sufficiently  comprehensive 
to  provide  the  necessary  regulation  and  control.  Where 
several  municipalities  are  alike  interested  in  the  con- 
trol and  operation  of  the  same  municipal  public  utility, 
it  is  evident  that  the  control  which  they  would  thus 
exercise  independently  of  each  other,  being  naturally 
local  in  each  instance,  could  not  be  uniform.  Each 
municipality  is  necessarily  limited  to  its  own  territory 
so  that  the  only  method  by  which  to  secure  a  uniform 
668 


669  STATE    COMMISSIONS.  §  603 

regulation  would  be  at  the  hands  of  the  state  or 
through  a  state  public  utility  commission. 

§  603.     State    regulation    supplants    competition. — 

The  extent  of  the  information  necessary  and  the  scope 
of  the  data  essential  to  a  comprehensive  regulation  of 
service  at  a  fair  uniform  rate  can  be  secured  to  the 
best  advantage  by  the  state  in  connection  with  a  public 
utility  commission  of  trained  experts  on  the  subject. 
They  in  turn  can  serve  similar  departments  of  the  mu- 
nicipalities of  the  state  in  an  advisory  capacity,  and 
each  supplementing  the  other,  can  secure  the  best  re- 
sults at  the  least  expense.  The  theory  of  the  regula- 
tion of  municipal  public  utilities  by  the  state  through 
such  a  commission  is  to  avoid  competition  which  is 
now  generally  recognized  as  a  needless  economic 
waste  and  an  entirely  insufficient  method  of  securing 
the  necessary  regulation  and  control.  Under  this 
method  the  state  through  its  commission  takes  the 
place  of  competition  and  furnishes  the  regulation 
which  competition  can  not  give,  and  at  the  same  time 
avoids  the  expense  of  duplication  in  the  investment 
and  operation  of  competing  municipal  public  utilities. 

§  604.     Indeterminate  franchise  properly  regulated. 

— On  the  other  hand  the  municipal  public  utility 
operating  under  what  the  public  utilities  law  of  Wis- 
consin aptly  designates  the  indeterminate  franchise 
which  protects  the  municipal  public  utility  against 
competition  and  a  total  loss  which  may  occur  at  the 
expiration  of  the  franchise.  Under  this  law  the  public 
utility  commission  determines  in  the  first  instance 
whether  public  convenience  and  necessity  demand 
municipal  public  utility  service  where  such  a  company 
proposes  to  install  its  plant  and  furnish  such  service, 
and  only  after  a  determination  of  this  question  in  the 


§  605  PUBLIC   UTILITIES.  67O 

affirmative  and  the  granting  of  its  consent  by  the 
commission  may  the  municipal  public  utility  plant  be 
installed,  thus  avoiding  needless  competition  by  legal- 
izing a  monopoly.  The  consideration,  however,  for 
such  franchises  and  exclusive  privileges  is  that  they 
shall  be  constantly  and  completely  under  the  regula- 
tion and  control  of  the  state  through  its  public  utiHty 
commission. 

§  605.  State  control  of  capitalization  and  expendi- 
tures essential. — This  control  covers  the  question  of 
the  capitalization  of  the  municipal  public  utility  so 
that  the  amount  of  stock  and  bonds  issued  by  such 
a  company  is  determined  by  the  public  utility  commis- 
sion which  also  supervises  the  construction  of  the 
plant,  thus  insuring  the  expenditure  on  the  plant  of  all 
funds  received  from  the  sale  of  such  stock  and  bonds 
as  well  as  limiting  such  expenditure  and  preventing 
extravagance  or  unnecessary  construction.  This  con- 
trol over  the  capitalization  and  issue  of  stocks  and 
bonds  of  the  municipal  public  utility  by  the  state  not 
only  protects  the  consumer  of  the  service  in  a  fair 
rate  but  also  the  investor  in  the  pubHc  utility  securi- 
ties, insuring  on  the  one  hand  proper  service  at  a  rea- 
sonable rate  as  determined  by  the  actual  cost  and  on 
the  other  a  fair  return  on  the  investment  actually  put 
into  the  business.  By  such  regulation  capitalization 
and  investment  coincide  which  simplifies  the  matter 
of  rate  regulation  as  well  as  that  of  making  invest- 
ments in  the  securities  of  such  companies  and  pre- 
venting fluctuation  in  their  values. 

§  606.  Impartial  commission  of  experts  approved 
by  courts. — ^The  courts  have  been  among  the  first  and 
most  ardent  supporters  of  this  form  of  regulation  be- 
cause  it  is   practicable,   inexpensive   and   at   the   same 


671  STATE    COMMISSIONS.  §  607 

time  efficient  and  summary.  That  the  present  unbusi- 
ness-Hke  method  of  placing  the  control  of  municipal 
public  utilities  in  themselves  or  what  is  practically  too 
often  the  same  thing  in  the  politician  who  determines 
the  personnel  of  the  municipal  authorities  must  be 
remedied  by  the  creation  of  municipal  public  utility 
commissions  is  well  expressed  in  the  case  of  Des 
Moines  Water  Co.  v.  Des  Moines,  192  Fed.  193,  de- 
cided in  191 1,  where  the  court  says:  "The  present  ex- 
pensive chaos  should  be  brought  to  an  end.  It  is 
known  by  all  informed  men  that  city  councils  neces- 
sarily adopt  rates  with  but  little  or  no  investigation  as 
to  what  rates  ought  to  be  fixed.  The  result  is  that 
we  have  ordinances  fixing  rates  based  upon  but  little 
intelligent  effort  for  the  ascertainment  of  the  facts. 
Some  of  the  states,  like  New  York,  Massachusetts, 
and  Wisconsin,  have  state  commissions  of  competent 
men,  who  give  public  hearings,  and  who  do  nothing 
behind  doors,  nor  in  secrecy — a  commission  with  no 
member  interested  as  a  taxpayer  of  the  city,  and  with 
no  member  subject  to  influences  other  than  the  ascer- 
tainment of  the  truth  and  the  facts.  Rates  are  thus 
fixed  with  which  most  fair-minded  people  are  ready  to 
acquiesce.  It  is  strange  that  we  have  no  such  legis- 
lation and  no  such  commissions  in  Iowa." 

§  607.  Commission  required  by  importance  and 
complexity  of  duty. — The  complexity  of  the  question 
and  the  importance  of  its  proper  solution  by  the  public 
utility  commission  which  is  the  only  available  method 
that  is  practical  and  sufficient  is  indicated  in  the  case 
of  La  Crosse  v.  La  Crosse  Gas  &  Electric  Co.,  145  Wis. 
408,  130  N.  W.  530,  decided  in  1911,  where  the  court 
says:  "It  is  useless  to  extend  this  opinion  further 
for  the  purpose  of  picturing  the  situation  dealt  with 
by   the   legislature.     The    magnitude   of   the    task   was 


§  6o8  PUBLIC   UTILITIES.  6/2 


great.     Few,  if  any,  greater  have  been  dealt  with  in  | 

our   legislative   history.     The   result   stands   significant  '' 

as  a  monument  to  legislative  wisdom.  That  such  a 
complicated  situation  has  been  met  by  written  law  in 
such  a  way  as  to  avoid  successful  attack  up  to  this 
time  on  the  vahdity  of  the  law  or  any  part  of  it,  and  ^ 

avoid  attack  at  all  either  upon  the  law  or  its  admin-  w 

istration,  except  in  a  very  few  instances,  and  secure 
optional  submission  by  many  owners  of  old  franchises 
to  a  displacement  of  their  privileges,  is  quite  a  marvel. 
.  .  .  Doubtless,  we  reiterate,  it  was  thought  that 
sound  policy  required  old  franchises  with  their  mul- 
tiplicity of  differences  to  be  brought  under  one  system 
so  that  the  things  formerly  privileged  might  continue 
to  be  so  but  solely  under  conditions  and  limitations 
referable  to  a  single  standard,  to  wit,  the  public  utility 
law,  with  its  administrative  board  to  dominate  the 
situation  as  between  the  owners  of  privileges  and  the 
public,  to  the  end  that  each  might  be  coerced,  if  need 
be,  to  deal  justly  with  the  other,  accomplishing  an  era 
of  fair  exchange  of  equivalents  involving  service  being 
furnished  customers  of  the  best  character  and  at  the 
lowest  price  practicable  and  without  discrimination, 
and  rendition  therefor  of  such  just  and  reasonable 
compensation  as  under  the  circumstances  of  each  sit- 
uation would  enable  performance  of  the  mutual  obli- 
gations practicable." 

§  608.  Franchise  provisions  and  matters  of  ad- 
ministration described. — One  of  the  best  arguments  in 
favor  of  the  state  public  utility  commission  which  at 
the  same  time  describes  in  detail  the  nature  of  the 
indeterminate  franchise  and  the  reason  for  its  adoption 
is  furnished  in  the  case  of  Calumet  Service  Co.  v.  Chil- 
ton, 148  Wis.  334,  135  N.  W.  131,  decided  Feb.  20, 
1912,    where    the    court    says:      "So    the    findings    are 


673  STATE   COMMISSIONS.  §  6o8 

amply  sustained  that  the  electric  company,  December 
21,  1907,  acquired  an  indeterminate  permit.  The  sur- 
render proceedings  in  form  and  substance  were  with- 
out infirmity;  the  company  had  all  the  essentials  of 
capacity  to  make  the  exchange — (a)  it  was  a  public 
utility;  (b)  it  was  a  duly  organized  corporation  under 
the  laws  of  this  state;  (c)  it  had  a  'license,  permit  or 
franchise'  to  do  public  utility  business  in  the  city  of 
Chilton;  and  (d)  it  was  operating  under  such  'license, 
permit  or  franchise.'  .  .  .  The  findings  are  to  the 
effect  that  only  the  privilege  feature  of  the  old  fran- 
chise survived  the  surrender  for  its  equivalent  emanat- 
ing directly  from  the  state;  that  all  the  conditions 
and  limitations  of  the  old  one  and  all  contract  fea- 
tures between  the  city  and  the  owners  of  the  privilege 
inherent  in  the  grant,  were  extinguished  by  the  sur- 
render and  superseded  by  the  'conditions  and  limita- 
tions' of  the  public  utility  law.  ...  In  other 
words,  the  idea  is  that  the  grantee,  under  state  control, 
and  subject  to  prescribed  limitations  and  supervision, 
shall  have  a  'monopoly,'  as  it  has  been  several  times 
called  by  the  railroad  commission,  in  its  administra- 
tive work,  and  by  this  court,  within  the  field  covered 
by  the  privilege,  as  to  rendering  the  particular  public 
utility  service,  whether  directly  or  indirectly,  to  or  for 
the  public.  We  should  say,  in  passing,  that  the  term 
'monopoly'  as  thus  used  is  to  be  taken  in  the  sense  of 
a  mere  exclusive  privilege  granted  for  a  consideration 
equivalent;  monopoly  only  in  the  sense  that  the  field 
of  activity  is  reserved  to  the  grantee — the  mere  ele- 
ment of  exclusiveness.  .  .  .  The  evident  intention 
of  the  legislature,  expressed  in  unambiguous  language, 
when  read  in  the  light  of  the  situation  dealt  with,  was 
.  .  .  to  substitute  a  new  situation,  all  looking  to 
unity,  in  practical  effect,  of  a  multitude  of  diverse  units 
corresponding  to  the  many  outstanding  franchises, 
43— Pub.  ut. 


§  609  PUBLIC    UTILITIES.  674 

and  others  in  prospect,  harmonizing  them  by  making 
them  referable  to  a  single  standard,  to  wit,  the  public 
utility  law,  and  to  an  ultimate  single  control,  to  wit, 
control  by  the  trained  impartial  state  commission,  so 
as  to  effect  the  one  supreme  purpose,  i.  e.,  "the  best 
service  practicable  at  reasonable  cost  to  consumers  in 
all  cases  and  as  near  a  uniform  rate  for  service  as 
varying  circumstances  and  conditions  would  permit — 
a  condition  as  near  the  ideal  probably  as  could  be  at- 
tained." 

§  609.     Monopoly    under    indeterminate    permit. — 

This  case  supplements  that  of  State  v.  Kenosha  Elec- 
tric R.  Co.,  145  Wis.  337,  129  N.  W.  600,  decided  in 
1911,  which  furnishes  a  further  statement  and  expla- 
nation of  the  indeterminate  franchise  plan  as  provided 
for  in  the  public  utilities  law  of  Wisconsin,  where  the 
court  said:  "The  intent  was  to  give  the  holder  of  an 
indeterminate  permit,  within  the  scope  thereof,  a 
monopoly,  so  long  as  the  convenience  and  necessities 
of  the  public  should  be  reasonably  satisfied,  yet  to  se- 
cure to  the  public  the  benefit  of  the  monopoly  in 
excess  of  a  fair  return  upon  the  investment,  under 
proper  administration,  by  insuring  to  the  consumers 
the  best  practicable  service  at  the  lowest  practicable 
cost,  and  to  that  end  prohibit,  conditionally,  the  grant- 
ing of  just  such  franchises  as  the  one  challenged  in 
this  case  in  the  circumstances  under  which  the  ordi- 
nance of  June  7,  1909,  was  passed.  .  .  .  Here  the 
legislature  provided,  in  effect,  that  in  case  of  there 
existing  under  an  indeterminate  permit,  a  right  of  a 
corporation  to  enjoy  such  privileges  as  are  involved  in 
this  case,  no  other  permit  or  franchise  shall  be  granted 
to  any  one  to  invade,  in  whole  or  in  part,  the  same 
field,  except  upon  a  specified  condition  involving  the 
ascertainment  of  a  fact.     .     .     .     The  mere   adminis- 


fi 


675  STATE    COMMISSIONS.  §  6lO 

trative  labor  of  ascertaining  the  fact,  is  not  legislative 
power  at  all  in  the  undelegable  sense.  Such  adminis- 
trative feature  does  not  involve  any  element  of  ex- 
pediency or  legislative  discretion,  but  only  the  judg- 
ment and  discretion  which  any  person  or  body  com- 
monly exercises  to  ascertain  whether  a  given  situation 
satisfied  the  calls  of  a  rule  prescribed  by  higher  au- 
thority to  a  lower  for  guidance  and  enforcement." 

§  6 10.  State  commissions  first  established. — Mass- 
achusetts was  the  first  state  to  adopt  this  commission 
form  of  regulation  for  municipal  public  utilities  as  a 
substitution  for  the  control  by  competition  which  must 
always  be  insufficient  and  unsatisfactory  in  the  case  of 
such  natural  monopolies,  for  as  the  court  in  Weld  v. 
Gas  &  Electric  Light  Comrs.,  197  Mass.  556,  84  N.  E. 
lOi,  decided  in  1908,  says:  "In  the  first  place,  in 
reference  to  this  department  of  public  service,  we  have 
adopted,  in  this  state,  legislative  regulation  and  con- 
trol as  our  reliance  against  the  evil  effects  of  monop- 
oly, rather  than  competitive  action  between  two  or 
more  corporations,  where  such  competition  will  greatly 
increase  the  aggregate  cost  of  supplying  the  needs  of 
the  public,  and  perhaps  cause  other  serious  inconveni- 
ences. .  .  .  The  state,  through  the  regularly  con- 
stituted authorities,  has  taken  complete  control  of 
these  corporations  so  far  as  is  necessary  to  prevent  the 
abuses  of  monopoly.  Our  statutes  are  founded  on 
the  assumption  that,  to  have  two  or  more  competing 
companies  running  lines  of  gas  pipe  and  conduits  for 
electric  wires  through  the  same  streets  would  often 
greatly  increase  the  necessary  cost  of  furnishing  light, 
as  well  as  cause  great  inconvenience  to  the  public  and 
to  individuals  from  the  unnecessary  digging  up  of  the 
streets  from  time  to  time,  and  the  interference  with 
pavements,    street    railway    tracks,    water    pipes    and 


§6ll  PUBLIC    UTILITIES.  d'J^i 

Other  structures.  Attorney  General  v.  Walworth 
Light  and  Power  Co.,  157  Mass.  87,  31  N.  E.  482,  16 
L.  R.  A.  398.  In  reference  to  some  kinds  of  public 
service,  and  under  some  conditions,  it  is  thought  by 
many  that  regulation  by  the  state  is  better  than  com- 
petition." 

This  principle  was  established  and  fully  recognized 
as  constitutional  and  practical  in  this  jurisdiction  as 
indicated  in  the  case  of  Attorney  General  ex  rel.  v. 
Walworth  L.  &  P.  Co.,  157  Mass.  86,  31  N.  E.  482,  16 
L.  R.  A.  398,  decided  in  1892,  where  the  court  says: 
"The  legislature  may  think  that  a  business  like  that 
of  transmitting  electricity  through  the  streets  of  a  city 
has  got  to  be  transacted  by  a  regulated  monopoly, 
and  that  a  free  competition  between  as  many  com- 
panies and  persons  as  may  be  minded  to  put  up  wires 
in  the  streets,  and  to  try  their  luck  is  impracticable. 
Without  wasting  time  upon  useless  generalities  about 
the  construction  of  statutes,  it  is  enough  to  say  that 
the  statute  before  us  had  that  consideration  in  view, 
and  must  be  construed  accordingly." 

§611.  Police  power  as  basis  for  regulation. — That 
the  police  power  constitutes  the  basis  for  state  regula- 
tion which  when  properly  availed  of  may  avoid  the 
necessity  for  ownership  by  the  municipality  or  the 
state  is  indicated  in  the  case  of  State  ex  rel.  Webster 
V.  Superior  Court  of  King  County,  67  Wash.  37,  120 
Pac.  861,  decided  Jan.  27,  1912,  where  the  court  says: 
"In  its  search  for  remedies  and  while  seriously  con- 
sidering municipal,  state,  or  government  ownership, 
the  public,  by  reference  to  the  police  power  of  the 
state,  has  almost  unwittingly — unwittingly  in  the  sense 
that  it  is  not  generally  appreciated — solved  the  prob- 
lem, and  has  by  the  application  of  fundamental  as  well 
as  established  relative  propositions  of  law  gained  every 


677  STATE   COMMISSIONS.  §  6l2 

advantage  of  ownership  without  assuming  its  burdens. 
From  the  time  it  was  held  to  be  within  the  pohce 
power  of  the  state  to  control  public  service  corpora- 
tions to  the  extent  of  fixing  rates,  the  natural  se- 
quences of  that  holding  have  followed  with  a  rapidity 
which  may  seem  to  those  who  have  been  wedded  to 
the  theory  that  the  government  could  not  interfere 
in  the  use,  or  limit  the  earnings,  of  property  devoted 
to  public  service  and  which  was  not  put  to  an  unlaw- 
ful use,  to  be  alarming." 

§  612.  Scope  of  activity  of  business  requires  state 
commission. — That  many  municipal  public  utilities  are 
interurban  or  even  interstate  in  their  operations  there- 
by necessitating  either  state  or  interstate  rather  than 
municipal  regulation  is  well  expressed  in  the  case  of 
Texarkana  v.  Southwestern  Tel.  &  T.  Co.,  48  Tex. 
Civ.  App.  16,  106  S.  W.  915,  decided  in  1907,  where 
the  court  says:  "When  we  consider  the  nature  of  the 
business  of  telegraph  and  telephone  lines  in  this  busy 
commercial  age,  we  have  a  most  cogent  reason  for  the 
legislature  declining  to  commit  to  the  arbitrary  con- 
trol of  the  municipalities  throughout  the  state  the  use 
by  such  companies  of  the  public  streets  and  alleys. 
These  companies  are  not  primarily  of  local  concern, 
affecting  only  the  inhabitants  of  the  towns  and  cities 
through  which  they  pass,  but  they  essentially  concern 
the  public  at  large,  in  that  they  furnish  quick  and 
cheap  means  of  communication  between  all  points 
throughout  the  country,  by  which  a  very  large  per- 
centage of  the  business  of  the  country  is  transacted. 
In  other  words,  the  business  is  such  a  one  as  calls  for 
the  exercise  of  state  regulation  rather  than  the  dele- 
gated power  of  municipal  control." 

The  necessity  for  state  regulation  in  the  interest 
of   the    public    and   especially   of   the    consumer   of   the 


§  6l2  PUBLIC   UTILITIES.  678" 

service  and  of  such  a  method  of  regulation  as  the  one 
proposed  to  insure  it  being  fair  and  reasonable  is  indi- 
cated by  the  case  of  Consolidated  Gas  Co.  v.  Mayor^ 
146  Fed.  150,  decided  in  1906,  where  the  court  says: 
"A  corporation  which  undertakes,  for  its  own  emolu- 
ment, to  supply  gas  to  the  inhabitants  of  a  municipal- 
ity, under  charters  and  franchises  from  the  state  which 
allow  it  to  embark  in  such  industry,  and  invite  its 
stockholders  to  invest  their  money  therein,  is  engaged 
in  what  is  called  a  'public  service'  or  a  'public  utility,' 
and  therefore  is  under  the  supervision,  inquisition,  and 
regulation  of  the  state  as  to  the  manner  in  which  it 
•conducts  its  business.  If,  untrammeled  by  competi- 
tion it  charges  a  price  far  above  all  reasonable  cost  to 
the  helpless  consumer,  who  must  pay  that  price  or  go 
without,  while  it  receives  an  exorbitant  return  on  such 
of  its  property  as  is  invested  in  the  enterprise,  the 
state  may  step  in  and  reduce  that  price  to  such  sum 
as  will,  taking  everything  into  consideration,  be  a  rea- 
sonable return  upon  what  has  been  adventured  [in  the 
adventure]  in  the  enterprise  on  the  faith  of  the  state's 
franchises.  No  one  disputes  this  proposition.  But  in 
fixing  such  price  the  state  should  itself  be  fair  and 
reasonable — should  certainly  stop  short  of  confisca- 
tion." 

That  the  municipality  has  not  the  necessary  juris- 
diction to  regulate  the  public  utility  which  operates 
beyond  its  territory  and  within  that  of  several  munici- 
palities, none  of  which  has  the  ability  nor  the  capacity 
adequately  to  regulate  and  control  the  service  and  the 
rate  to  be  charged  for  it  is  held  in  the  case  of  South 
Pasadena  v.  Los  Angeles  Terminal  R.  Co.,  109  Cal. 
315,  41  Pac.  1093,  decided  in  1895,  where  the  court 
says:  "One  of  the  limitations  upon  such  ordinances  is 
that  they  can  have  no  extra  territorial  force  unless  by 
express    permission    of   the    sovereign    power.      In   the 


679  STATE    COMMISSIONS.  §  6l2 

nature  of  things,  this  must  be  so  unless  intolerable  con- 
fusion and  evil  is  to  result;  and  the  constitution  of  the 
state,  recognizing  the  necessity  for  such  a  restriction, 
has  provided  (article  II,  section  ii)  that  'any  county, 
city,  etc.,  may  make  and  enforce  within  its  limits  all 
such  local,  .  .  .  and  other  regulations  as  are  not 
in  conflict  w^ith  general  laws.'  Here  was  a  road  lying 
partly  within  the  confines  of  at  least  three  municipali- 
ties— Los  Angeles,  South  Pasadena,  and  Pasadena. 
Conceding  the  right  of  plaintiff  to  impose  a  limitation 
on  the  charges  to  be  made  for  passage  between  sta- 
tions within  its  limits  and  stations  elsewhere,  then  the 
other  cities  named  have,  or  might  have,  the  same 
right." 

The  purposes  of  public  utility  commissions  are 
thus  defined  in  a  very  recent  case:  "That  law  was 
enacted  in  response  to  a  pronounced  and  insistent  pub- 
lic opinion,  and  was  a  radical  and  important  modifica- 
tion of  the  relations  and  policy  of  the  people  toward 
the  corporations,  which  are  its  subjects.  Its  para- 
mount purpose  was  to  protect  and  enforce  the  rights 
of  the  public.  It  made  the  commissions  the  guardians 
of  the  public  by  enabling  them  to  prevent  the  issue  of 
stock  and  bonds  for  other  than  statutory  purposes,  or 
in  appreciable  and  unfair  excess  of  the  value  of  the 
assets  securing  them,  and  to  prevent,  also,  unneeded 
or  extortionate  competition,  or  indifferent  and  unac- 
commodating methods  of  operation,  or  oppressive  or 
discriminating  charges  or  rates.  It  provided  for  a  reg- 
ulation and  control  which  were  intended  to  prevent,  on 
the  one  hand,  the  evils  of  an  unrestricted  right  of 
competition,  and,  on  the  other  hand,  the  abuses  of 
monopoly."^ 

'  People  ex  rel.  New  York  Edison  Co.  v.  Willcox,  207  X.  Y.  86, 
100  N.  E.  705. 


APPENDIX  A. 

THE    PUBLIC    SERVICE    COMMISSIONS    LAW 
OF  NEW  YORK. 

As  Revised  and  Amended  to  Close  of  Legislature  of 
1912. 

Article      I.  Public  service  commissions;  general  provisions  (§§  1-24). 
II.  Provisions   relating   to   railroads,   street   railroads   and 
common  carriers  (§§  25-40). 

III.  Provisions  relating  to  the  powers  of  the  commissions  in 

respect  to  railroads,  street  railroads  and  common  car- 
riers  (§§45-59). 

IV.  Provisions  relating  to  gas  and  electric  corporations;  reg- 

ulation of  price  of  gas  and  electricity  (§§  64-77). 
V.  Provisions  relating  to  telegraph  and  telephone  lines  and 

to  telephone  and  telegraph  corporations  (§§  90-103). 
VI.  Commissions  and  offices  abolished;  saving  clause;  repeal 
(§§  120-127). 

ARTICLE  I. 
Public  Service  Commissions;  General  Provisions. 


Section      1. 
2. 


10. 


Short  title. 

Definitions. 

Public  service  districts. 

Commissions  established;  appointment;  removal;  terms 
of  office. 

Jurisdiction  of  commissions. 

Counsel  to  the  commissions. 

Secretary  to  the  commissions. 

Additional  officers  and  employees. 

Oath  of  office;  eligibility  of  commissioners  and  officers. 

Offices    of    commissions;    meetings;    official    seal;    sta- 
tionery. 

Quorum;  powers  of  a  commissioner. 

Counsel  to  the  commissions;  duties. 
681 


682  PUBLIC   UTILITIES. 

13.  Salaries  and  expenses. 

14.  Payment  of  salaries  and  expenses. 

15.  Certain  acts  prohibited. 

16.  Reports  of  commissions. 

17.  Certified  copies  of  papers  filed  to  be  evidence. 

18.  Fees  to  be  charged  and  collected  by  the  commissions. 

19.  Attendance  of  witnesses  and  their  fees. 

20.  Practice  before  the  commissions;  immunity  of  witnesses. 

21.  Court  proceedings;  preference. 

22.  Rehearing  before  commission. 

23.  Service  and  effect  of  orders. 

24.  Actions  to  recover  penalties  or  forfeitures. 

Section  i.  Short  title.  This  chapter  shall  be 
known  as  the  "Public  Service  Commissions  Law,"  and 
shall  apply  to  the  public  services  herein  described  and 
to  the  commissions  hereby  created. 

§  2.  Definitions,  i.  The  term  "commission," 
when  used  in  this  chapter,  means  either  public  service 
commission  hereby  created,  which  by  the  terms  of  this 
chapter  is  vested  with  the  power  or  charged  with  the 
duty  in  question. 

2.  The  term  "commissioner,"  when  used  in  this 
chapter,  means  one  of  the  members  of  such  commis- 
sion. 

3.  The  term  "corporation,"  when  used  in  this 
chapter,  includes  a  corporation,  company,  association 
and  joint-stock  association. 

4.  The  word  "person,"  when  used  in  this  chapter, 
includes  an  individual,  and  a  firm  or  copartnership. 

5.  The  term  "street  railroad,"  when  used  in  this 
chapter,  includes  every  railroad  by  whatsoever  power 
operated,  or  any  extension  or  extensions,  branch  or 
branches  thereof,  for  public  use  in  the  conveyance  of 
persons  or  property  for  compensation,  being  mainly 
upon,  along,  above  or  below  any  street,  avenue,  road, 
highway,  bridge  or  public  place  in  any  city,  village  or 
town,    and    including    all    equipment,    switches,    spurs, 


NEW  YORK  LAW.  683 

tracks,  right  of  trackage,  subways,  tunnels,  stations 
terminals  and  terminal  facilities  of  every  kind  used, 
operated  or  owned  by  or  in  connection  with  any  such 
street  railroad;  but  the  said  term  "street  railroad," 
when  used  in  this  chapter,  shall  not  include  a  railroad 
constituting  or  used  as  part  of  a  trunk  line  railroad 
system. 

6.  The  term  "railroad,"  when  used  in  this  chap- 
ter, includes  every  railroad,  other  than  a  street  rail- 
road, by  whatsoever  power  operated  for  public  use 
in  the  conveyance  of  persons  or  property  for  compen- 
sation, with  all  bridges,  ferries,  tunnels,  equipment, 
switches,  spurs,  tracks,  stations  and  terminal  facilities 
of  every  kind  used,  operated  or  owned  by  or  in  con- 
nection with  any  such  railroad. 

7.  The  term  "street  railroad  corporation,"  when 
used  in  this  chapter,  includes  every  corporation,  com- 
pany, association,  joint-stock  association,  partnership 
and  person,  their  lessees,  trustees  or  receivers  ap- 
pointed by  any  court  whatsoever,  owning,  operating 
or  managing  any  street  railroad  or  any  cars  or  other 
equipment  used  thereon  or  in  connection  therewith. 

8.  The  term  "railroad  corporation,"  when  used  in 
this  chapter,  includes  every  corporation,  company, 
association,  joint-stock  association,  partnership  and 
person,  their  lessees,  trustees  or  receivers  appointed 
by  any  court  whatsoever,  owning,  operating  or  manag- 
ing any  railroad  or  any  cars  or  other  equipment  used 
thereon  or  in  connection  therewith. 

9.  The  term  "common  carrier,"  when  used  in  this 
chapter,  includes  all  railroad  corporations,  street  rail- 
road corporations,  express  companies,  car  companies, 
sleeping-car  companies,  freight  companies,  freight-line 
companies,  and  every  corporation,  company,  associa- 
tion, joint-stock  association,  partnership  and  person, 
their   lessees,    trustees   or   receivers   appointed   by    any 


684  PUBLIC   UTILITIES. 

court  whatsoever,  owning,  operating  or  managing  any- 
such  agency  for  public  use  in  the  conveyance  of  per- 
sons, or  property  within  this  state;  but  the  said  term 
common  carrier  when  used  in  this  chapter  shall  not 
include  an  express  company  unless  the  same  is  oper- 
ated wholly  or  in  part  upon,  or  in  connection  with  a 
railroad  or  street  railroad. 

10.  The  term  "gas  plant,"  when  used  in  this  chap- 
ter, includes  all  real  estate,  fixtures  and  personal  prop- 
erty operated,  owned,  used  or  to  be  used  for  or  in 
connection  with  or  to  facilitate  the  manufacture,  dis- 
tribution, sale  or  furnishing  of  gas  (natural  or  manu- 
factured) for  light,  heat  or  power. 

11.  The  term  "gas  corporation,"  when  used  in 
this  chapter,  includes  every  corporation,  company,  as- 
sociation, joint-stock  association,  partnership  and  per- 
-son,  their  lessees,  trustees  or  receivers  appointed  by 
any  court  whatsoever,  owning,  operating  or  managing 
any  gas  plant  except  where  gas  is  made  or  produced 
and  distributed  by  the  maker  on  or  through  private 
property  solely  for  its  own  use  or  the  use  of  its  ten- 
ants and  not  for  sale  to  others. 

12.  The  term  "electric  plant,"  when  used  in  this 
chapter,  includes  all  real  estate,  fixtures  and  personal 
property  operated,  owned,  used  or  to  be  used  for  or 
in  connection  with  or  to  facilitate  the  generation, 
transmission,  distribution,  sale  or  furnishing  of  elec- 
tricity for  light,  heat  or  power;  and  any  conduits,  ducts 
or  other  devices,  materials,  apparatus  or  property  for 
containing,  holding  or  carrying  conductors  used  or  to 
be  used  for  the  transmission  of  electricity  for  light, 
heat  or  power. 

13.  The  term  "electrical  corporation,"  when  used 
in  this  chapter,  includes  every  corporation,  company, 
association,  joint-stock  association,  partnership  and 
person,  their  lessees,  trustees  or  receivers  appointed  by 


NEW   YORK  LAW.  685 

any  court  whatsoever  (other  than  a  railroad  or  street 
railroad  corporation  generating  electricity  solely  for 
railroad  or  street  railroad  purposes  or  for  the  use  of 
its  tenants  and  not  for  sale  to  others)  owning,  operat- 
ing or  managing  any  electric  plant  except  where  elec- 
tricity is  generated  or  distributed  by  the  producer 
solely  on  or  through  private  property  for  railroad  or 
street  railroad  purposes  or  for  its  own  use  or  the  use 
of  its  tenants  and  not  for  sale  to  others. 

14.  The  term  "transportation  of  property,"  when 
used  in  this  chapter,  includes  any  service  in  connec- 
tion with  the  receiving,  delivery,  elevation,  transfer  in 
transit,  ventilation,  refrigeration,  icing,  storage  and 
handling  of  the  property  transported. 

15.  The  term  "line,"  when  used  in  this  chapter, 
includes  "route." 

16.  The  term  "municipality,"  when  used  in  this 
chapter,  includes  a  city,  village,  town  or  lighting  dis- 
trict, organized  as  provided  by  a  general  or  special 
act. 

17.  The  term  "telephone  corporation,"  when  used 
in  this  chapter,  includes  every  corporation,  company, 
association,  joint-stock  association,  partnership  and 
person,  their  lessees,  trustees  or  receivers  appointed 
by  any  court  whatsoever,  owning,  operating  or  manag- 
ing any  telephone  line  or  part  of  telephone  line  used 
in  the  conduct  of  the  business  of  affording  telephonic 
communication  for  hire;  excepting,  however,  any  cor- 
poration, company,  association,  joint-stock  association, 
partnership  or  person,  their  lessees,  trustees  or  re- 
ceivers having  property  actually  used  in  the  public 
service  within  the  state  of  a  value  not  exceeding  ten 
thousand  dollars,  or  which  do  not  operate  the  business 
of  affording  telephonic  communication   for   profit. 

18.  The  term  "telephone  line,"  when  used  in  this 
chapter,   includes  conduits,   ducts,   poles,   wires,   cables, 


686  PUBLIC   UTILITIES. 

cross-arms,  receivers,  transmitters,  instruments,  ma- 
chines, appliances  and  all  devices,  real  estate,  ease- 
ments, apparatus,  property  and  routes  used,  operated 
or  owned  by  any  telephone  corporation  to  facilitate  the 
business   of   affording  telephonic  communication. 

19.  The  term  "telegraph  corporation,"  when  used 
in  this  chapter,  includes  every  corporation,  company, 
association,  joint-stock  association,  partnership  and 
person,  their  lessees,  trustees  or  receivers,  appointed 
by  any  court  whatsoever,  owning,  operating  or  manag- 
ing any  telegraph  line  or  part  of  telegraph  line  used 
in  the  conduct  of  the  business  of  affording  for  hire 
communication  by  telegraph. 

20.  The  term  "telegraph  line,"  when  used  in  this 
chapter,  includes  conduits,  ducts,  poles,  wires,  cables, 
cross-arms,  instruments,  machines,  appliances  and  all 
devices,  real  estate,  easements,  apparatus,  property 
and  routes  used,  operated  or  owned  by  any  telegraph 
corporation  to  facilitate  the  business  of  affording 
communication  by  telegraph. 

§  3.  Public  service  districts.  There  are  hereby 
created  two  public  service  districts,  to  be  known  as  the 
first  district  and  the  second  district.  The  first  district 
shall  include  the  counties  of  New  York,  Kings,  Queens 
and  Richmond.  The  second  district  shall  include  all 
other  counties  of  the  state. 

§  4.  Commissions  established ;  appointment ;  re- 
moval; terms  of  office.  There  shall  be  a  public  service 
commission  for  each  district,  and  each  commission 
shall  possess  the  powers  and  duties  hereinafter  speci- 
fied, and  also  all  powers  necessary  or  proper  to  enable 
it  to  carry  out  the  purposes  of  this  chapter.  The 
commission  of  the  first  district  shall  consist  of  five 
[Subdivisions  17,  18,  19  and  20  added  by  ch.  673,  L.  1910.] 


NEW  YORK  LAW.  687 

members  and  the  commission  of  the  second  district 
shall  consist  of  five  members,  to  be  appointed  by  the 
governor,  by  and  with  the  advice  and  consent  of  the 
senate,  one  of  whom  designated  by  the  governor  shall, 
during  his  term  of  office,  be  the  .chairman  of  the  com- 
mission of  which  he  is  a  member.  Each  commissioner 
shall  be  a  resident  of  the  district  for  which  he  is  ap- 
pointed. 

The  governor  may  remove  any  commissioner  for 
inefficiency,  neglect  of  duty  or  misconduct  in  office, 
giving  to  him  a  copy  of  the  charges  against  him,  and 
an  opportunity  of  being  publicly  heard  in  person  or 
by  counsel  in  his  own  defense,  upon  not  less  than  ten 
days'  notice.  If  such  commissioner  shall  be  removed 
the  governor  shall  file  in  the  office  of  the  secretary 
of  state  a  complete  statement  of  all  charges  made 
against  such  commissioner,  and  his  findings  thereon, 
together  with  a  complete  record  of  the  proceedings. 

Of  the  members  of  the  commission  in  each  district 
first  appointed  hereunder,  one  shall  hold  office  until 
February  first,  nineteen  hundred  and  nine,  one  until 
February  first,  nineteen  hundred  and  ten,  one  until 
February  first,  nineteen  hundred  and  eleven,  one  until 
February  first,  nineteen  hundred  and  twelve,  and  one 
until  February  first,  nineteen  hundred  and  thirteen; 
the  term  of  office  of  each  commissioner  so  appointed 
shall  begin  on  the  first  day  of  July,  nineteen  hundred 
and  seven.  Upon  the  expiration  of  each  of  such  terms, 
the  term  of  office  of  each  commissioner  thereafter 
appointed  shall  be  five  years  from  the  first  of  Feb- 
ruary. Vacancies  shall  be  filled  by  appointment  for 
the  unexpired  term. 

§  5.  Jurisdiction  of  commissions,  i.  The  juris- 
diction,   supervision,   powers   and   duties   of   the   public 


688  PUBLIC   UTILITIES. 

service   commission   in   the   first   district   shall   extend 
under  this  chapter: 

a.  To  railroads  and  street  railroads  lying  exclu- 
sively within  that  district,  and  to  the  persons  or  cor- 
porations owning,  leasing  or  operating  the  same; 

b.  To  street  railroads  any  portion  of  whose  lines 
lies  within  that  district,  to  all  transportation  of  persons 
or  property  thereon  within  that  district  or  from  a  point 
within  either  district  to  a  point  within  the  other  dis- 
trict, and  to  the  persons  or  corporations  owning,  op- 
erating or  leasing  the  said  street  railroads;  provided, 
however,  that  the  commission  for  the  second  district 
shall  have  jurisdiction  over  such  portion  of  the  lines  of 
said  street  railroads  as  lies  within  the  second  district, 
and  over  the  persons  or  corporations  owning,  operat- 
ing or  leasing  the  same,  so  far  as  concerns  the  con- 
struction, maintenance,  stationary  equipment,  terminal 
facilities,  stations,  and  local  transportation  facilities  of 
said  street  railroads  within  the  second  district; 

c.  To  such  portion  of  the  lines  of  any  other  rail- 
road as  lies  within  that  district,  and  to  the  person  or 
corporation  owning,  leasing  or  operating  the  same,  so 
far  as  concerns  the  construction,  maintenance,  station- 
ary equipment,  terminal  facilities,  stations  and  local 
transportation  facilities,  and  local  transportation  of  per- 
sons or  property  within  that  district; 

d.  To  any  common  carrier  other  than  a  railroad 
corporation  or  street  railroad  corporation  operating 
or  doing  business  within  that  district,  so  far  as  con- 
cerns operations  exclusively  within  that  district; 

e.  To  the  manufacture,  sale  or  distribution  of  gas 
and  electricity  for  light,  heat  or  power  in  the  first 
district,  to  gas  plants  and  to  electric  plants  therein, 
and  to  the  persons  or  corporations  owning,  leasing  or 
operating  the  same. 

2.     And  in  addition  thereto,  the  commission  in  the 


NEW  YORK  LAW  689 

first  district  shall  have  and  exercise  all  powers  here- 
tofore conferred  upon  the  board  of  rapid  transit  rail- 
road commissioners  under  chapter  four  of  the  laws  of 
eighteen  hundred  and  ninety-one,  entitled  "An  act  to 
provide  for  rapid  transit  railways  in  cities  of  over  one 
million  inhabitants,"  and  the  acts  amendatory  thereof, 
together  with  such  other  and  necessary  powers  as  may 
be  requisite  to  the  efficient  performance  of  the  duties 
imposed  upon  said  board  by  said  act. 

3.  All  jurisdiction,  supervision,  powers  and  duties 
under  this  chapter  not  specifically  granted  to  the  pub- 
lic service  commission  of  the  first  district  shall  be 
vested  in,  and  be  exercised  by,  the  public  service  com- 
mission of  the  second  district,  including  the  regulation 
and  control  of  all  transportation  of  persons  or  prop- 
erty, and  the  instrumentalities  connected  with  such 
transportation,  on  any  railroad  other  than  a  street  rail- 
road from  a  point  within  either  district  to  a  point 
within  the  other  district. 

4.  A  corporation  or  person  owning  or  holding  a 
majority  of  the  stock  of  a  common  carrier,  gas  cor- 
poration or  electrical  corporation  subject  to  the  juris- 
diction of  the  commission  shall  be  subject  to  the  super- 
vision of  the  same  commission  in  respect  of  the  rela- 
tions between  such  common  carrier,  gas  corporation 
or  electrical  corporation  and  such  owners  or  holders 
of  a  majority  of  the  stock  thereof  in  so  far  as  such 
relations  arise  from  or  by  reason  of  such  ownership 
or  holding  of  stock  thereof  or  the  receipt  or  holding 
of  any  money  or  property  thereof  or  from  or  by  rea- 
son of  any  contract  between  them;  and  in  respect  of 
such  relations  shall  in  like  manner  and  to  the  same 
extent  as  such  common  carrier,  gas  corporation  or 
electrical  corporation  be  subject  to  examination  of 
accounts,  records  and  memoranda,  and  shall  furnish 
such  reports  and  information  as  the  commission  shall 

44— Pub.  UL 


690  PUBLIC   UTILITIES. 

from   time   to   time   direct   and   require,    and   shall   be 
subject  to  like  penalties  for  default  therein. 

5.  The  jurisdiction,  supervision,  powers  and  du- 
ties of  the  public  service  commission  in  the  second 
district  shall  extend,  under  this  chapter,  to  every  tele- 
phone line  which  lies  wholly  within  the  state  of  New 
York  and  that  part  within  the  state  of  New  York  of 
every  telephone  line  which  lies  partly  within  and  partly 
without  the  state  of  New  York  and  to  the  persons  or 
corporations  owning,  leasing  or  operating  any  such 
telephone  line. 

6.  The  jurisdiction,  supervision,  powers  and  duties 
of  the  public  service  commission  in  the  second  district 
shall  extend,  under  this  chapter,  to  every  telegraph 
line  which  lies  wholly  within  the  state  of  New  York 
and  that  part  within  the  state  of  New  York  of  every 
telegraph  line  which  lies  partly  within  and  partly  with- 
out the  state  of  New  York  and  to  the  persons  or  cor- 
porations owning,  leasing  or  operating  any  such  tele- 
graph line. 

7.  Corporations  formed  to  acquire  property  or  to 
transact  business  which  would  be  subject  to  the  pro- 
visions of  this  chapter,  and  corporations  possessing 
franchises  for  any  of  the  purposes  contemplated  by  this 
chapter,  shall  be  deemed  to  be  subject  to  the  provi- 
sions of  this  chapter  although  no  property  may  have 
been  acquired,  business  transacted  or  franchises  ex- 
ercised. 

§  6.  Counsel  to  the  commissions.  Each  commis- 
sion shall  appoint  as  counsel  to  the  commission  an 
attorney  and  counselor-at-law  of  the  state  of  New 
York,  who  shall  hold  office  during  the  pleasure  of  the 
commission.  Each  counsel  to  the  commission  shall, 
subject  to  the  approval  of  the  commission,  have  the 
[Subdivisions  5,  6  and  7  added  by  ch.  673,  L.  1910.] 


NEW  YORK  LAW.  69 1 

power  to  appoint,  and  at  pleasure  remove,  attorneys 
and  counselors-at-law,  to  assist  him  in  the  perform- 
ance of  his  duties,  and  also  to  employ  and  remove 
stenographers  and  process-servers. 

§  7.  Secretary  to  the  commissions.  Each  commis- 
sion shall  have  a  secretary  to  be  appointed  by  it  and 
to  hold  office  during  its  pleasure.  It  shall  be  the  duty 
of  the  secretary  to  keep  a  full  and  true  record  of  all 
proceedings  of  the  commission,  of  all  books,  maps, 
documents  and  papers  ordered  filed  by  the  commis- 
sion and  of  all  orders  made  by  a  commissioner  and  of 
all  orders  made  by  the  commission  or  approved  and 
confirmed  by  it  and  ordered  filed,  and  he  shall  be  re- 
sponsible to  the  commission  for  the  safe  custody  and 
preservation  of  all  such  documents  at  its  office.  Under 
the  direction  of  the  commission  the  secretary  shall 
have  general  charge  of  its  office,  superintend  its  cleri- 
cal business  and  perform  such  other  duties  as  the  com- 
mission may  prescribe.  He  shall  have  power  and 
authority  to  administer  oaths  in  all  parts  of  the  state, 
so  far  as  the  exercise  of  such  power  is  properly  inci- 
dental to  the  performance  of  his  duty  or  that  of  the 
commission.  The  secretary  shall  designate,  from  time 
to  time,  one  of  the  clerks  appointed  by  the  commis- 
sion to  perform  the  duties  of  secretary  during  his  ab- 
sence and,  during  such  time,  the  clerk  so  designated 
shall  at  the  office  possess  the  powers  of  the  secretary 
of  the  commission. 

§  8.  Additional  officers  and  employees.  Each 
commission  shall  have  power  to  employ,  during  its 
pleasure,  such  officers,  clerks,  inspectors,  experts  and 
employees  as  it  may  deem  to  be  necessary  to  carry 
out  the  provisions  of  this  chapter,  or  to  perform  the 


692  PUBLIC   UTILITIES. 

duties  and  exercise  the  powers  conferred  by  law  upon 
the  commission. 

§  9.  Oath  of  office ;  eligibility  of  commissioners 
and  officers.  Each  commissioner  and  each  person  ap- 
pointed to  office  by  a  commission  or  by  counsel  to  a 
commission  shall,  before  entering  upon  the  duties  of 
his  office,  take  and  subscribe  the  constitutional  oath 
of  office.  The  oaths  of  office  other  than  those  of  a 
commissioner,  the  counsel  and  secretary  shall  be  filed 
in  the  office  of  the  commission.  No  person  shall  be 
eligible  for  appointment  or  shall  hold  the  office  of  com- 
missioner or  be  appointed  by  a  commission  or  by 
counsel  to  a  commission  to,  or  hold,  any  office  or 
position  under  a  commission,  who  holds  any  official 
relation  to  any  person  or  corporation  subject  to  the 
supervision  of  either  commission,  or  who  owns  stock 
or  bonds  of  any  such  corporation. 

§  ID.  Offices  of  commissions;  meetings;  official 
seal;  stationery,  etc.  i.  The  principal  office  of  the 
commission  of  the  first  district  shall  be  in  the  borough 
of  Manhattan,  city  of  New  York;  and  the  office  of  the 
second  district  shall  be  in  the  city  of  Albany,  in  rooms 
designated  by  the  trustees  of  public  buildings.  Each 
commission  shall  hold  stated  meetings  at  least  once  a 
month  during  the  year  at  its  office.  Each  shall  have 
an  official  seal  to  be  furnished  and  prepared  by  the 
secretary  of  state  as  provided  by  law.  The  offices 
shall  be  supplied  with  all  necessary  books,  maps, 
charts,  stationery,  office  furniture,  telephone  and  tele- 
graph connections  and  all  other  necessary  appliances, 
to  be  paid  for  in  the  same  manner  as  other  expenses 
authorized  by  this  chapter. 

2.  The  offices  of  each  commission  shall  be  open 
for    business    between    the    hours    of    eight    o'clock    in 


NEW    YORK   LAW.  693 

the  morning  and  eleven  o'clock  at  night  every  day  in 
the  year,  and  one  or  more  responsible  persons,  to  be 
designated  by  the  commission  or  by  the  secretary 
under  the  'direction  of  the  commission,  shall  be  on 
duty  at  all  times  in  immediate  charge  thereof. 

§11.  Quorum ;  powers  of  a  commissioner.  A  ma- 
jority of  the  commissioners  shall  constitute  a  quorum 
for  the  transaction  of  any  business,  for  the  perform- 
ance of  any  duty  or  for  the  exercise  of  any  power  of 
the  commission,  and  may  hold  meetings  of  the  com- 
mission at  any  time  or  place  within  the  state.  Any 
investigation,  inquiry  or  hearing  which  either  commis- 
sion has  power  to  undertake  or  to  hold  may  be  under- 
taken or  held  by  or  before  any  commissioner.  All 
investigations,  inquiries,  hearings  and  decisions  of  a 
commissioner  shall  be  and  be  deemed  to  be  the  in- 
vestigations, inquiries,  hearings  and  decisions  of  the 
commission  and  every  order  made  by  a  commissioner, 
when  approved  and  confirmed  by  the  commission  and 
ordered  filed  in  its  office,  shall  be  and  be  deemed  to 
be  the  order  of  the  commission. 

§  12.  Counsel  to  the  commissions;  duties.  It  shall 
be  the  duty  of  counsel  to  a  commission  to  represent 
and  appear  for  the  people  of  the  state  of  New  York 
and  the  commission  in  all  actions  and  proceedings 
involving  any  question  under  this  chapter,  or  within 
the  jurisdiction  of  the  commission  under  the  railroad 
law,  or  under  or  in  reference  to  any  act  or  order  of 
the  commission,  and,  if  directed  to  do  so  by  the  com- 
mission, to  intervene,  if  possible,  in  any  action  or 
proceeding  in  which  any  such  question  is  involved;  to 
commence  and  prosecute  all  actions  and  proceedings 
directed  or  authorized  by  the  commission,  and  to  ex- 
pedite in  every  way  possible  final  determination  of  all 


694  PUBLIC   UTILITIES. 

such  actions  and  proceedings;  to  advise  the  commis- 
sion and  each  commissioner  when  so  requested  in  re- 
gard to  all  matters  in  connection  with  the  powers  and 
duties  of  the  commission  and  of  the  members  thereof, 
and  generally  to  perform  all  duties  and  services  as  at- 
torney and  counsel  to  the  commission  which  the  com- 
mission may  reasonably  require  of  him. 

§  13.  Salaries  and  expenses.  The  annual  salary  of 
each  commissioner  shall  be  fifteen  thousand  dollars 
($15,000).  The  annual  salary  of  counsel  to  a  commis- 
sion shall  be  ten  thousand  dollars  ($10,000).  The 
annual  salary  of  a  secretary  to  a  commission  shall  be 
six  thousand  dollars  ($6,000).  All  officers,  clerks,  in- 
spectors, experts  and  employees  of  a  commission,  and 
all  persons  appointed  by  the  counsel  to  a  commission, 
shall  receive  the  compensation  fixed  by  the  commis- 
sion. The  commissioners,  counsel  to  the  commission 
and  the  secretary,  and  their  of^cers,  clerks,  inspectors, 
experts  and  other  employees,  shall  have  reimbursed 
to  them  all  actual  and  necessary  traveling  and  other 
expenses  and  disbursements  incurred  or  made  by  them 
in  the  discharge  of  their  official  duties. 

§  14.  Payment  of  salaries  and  expenses,  i.  The 
salaries  of  the  commissioners,  the  counsel  to  the  com- 
mission, and  the  secretary  to  the  commission  in  the 
first  district  shall  be  audited  and  allowed  by  the  state 
comptroller,  and  paid  monthly  by  the  state  treasurer 
upon  the  order  of  the  comptroller  out  of  the  funds 
provided  therefor.  All  other  salaries  and  expenses  of 
the  commission  of  the  first  district  shall  be  audited  and 
paid  as  follows:  The  board  of  estimate  and  appor- 
tionment of  the  city  of  New  York,  or  other  board  or 
public  body  on  which  is  imposed  the  duty  and  in 
which   is   vested   the   power   of  making  appropriations 


NEW   YORK   LAW.  695 

of  public  moneys  for  the  purposes  of  the  city  govern- 
ment shall,  from  time  to  time,  on  requisition  duly 
made  by  the  public  service  commission  of  the  first 
district,  appropriate  such  sum  or  sums  of  money  as 
may  be  requisite  and  necessary  to  enable  it  to  do  and 
perform,  or  cause  to  be  done  and  performed,  the  du- 
ties in  this  or  in  any  other  act  prescribed,  and  to  pro- 
vide for  the  expenses  and  the  compensation  of  the 
employees  of  such  commission,  and  such  appropriation 
shall  be  made  forthwith  upon  presentation  of  a  requisi- 
tion from  the  said  commission,  which  shall  state  the 
purposes  for  which  such  moneys  are  required  by  it. 
In  case  the  said  board  of  estimate  and  apportionment, 
or  such  other  board  or  public  body,  fail  to  appropriate 
such  amount  as  the  said  commission  deems  requisite 
and  necessary,  the  said  commission  may  apply  to  the 
appellate  division  of  the  supreme  court  in  the  first 
department,  on  notice  to  the  board  of  estimate  and 
apportionment  or  such  other  board  or  public  body 
aforesaid,  to  determine  what  amount  shall  be  appro- 
priated for  the  purposes  so  required  and  the  decision 
of  said  appellate  division  shall  be  final  and  conclusive; 
and  the  city  shall  not  be  liable  for  any  indebtedness 
incurred  by  the  said  commission  in  excess  of  such 
appropriation  or  appropriations.  It  shall  be  the  duty 
of  the  auditor  and  comptroller  of  said  city,  after  such 
appropriation  shall  have  been  duly  made,  to  audit 
and  pay  the  proper  expenses  and  compensation  of  the 
employees  of  said  commission  other  than  its  counsel 
and  secretary,  upon  vouchers  therefor,  to  be  furnished 
by  said  commission,  which  payments  shall  be  made 
in  like  manner  as  payments  are  now  made  by  the 
auditor,  comptroller  or  other  public  officers  of  claims 
against  and  demands  upon  such  city;  and  for  the  pur- 
pose of  providing  funds  with  which  to  pay  the  said 
sums,   the   comptroller  or  other   chief   financial   officer 


696  PUBLIC  UTILITIES. 

of  said  city,  is  hereby  authorized  and  directed  to  issue 
and  sell  revenue  bonds  of  such  city  in  anticipation  of 
receipt  of  taxes  and  out  of  the  proceeds  of  such  bonds 
to  make  the  payments  in  this  section  required  to  be 
made.  The  amount  necessary  to  pay  the  principal  and 
interest  of  such  bonds  shall  be  included  in  the  esti- 
mates of  moneys  necessary  to  be  raised  by  taxation 
to  carry  on  the  business  of  said  city,  and  shall  be  made 
a  part  of  the  tax  levy  for  the  year  next  follow^ing  the 
year  in  which  such  appropriations  are  made.  The  said 
comptroller  shall  pay  the  proper  salaries  and  the  ex- 
penses of  the  said  commission  upon  its  requisition,  for 
the  remainder  of  the  fiscal  year  after  July  first,  nine- 
teen hundred  and  seven,  from  any  funds  that  may  have 
been  heretofore  appropriated  for  the  board  of  rapid 
transit  railroad  commissioners,  which  appropriation  is 
hereby  transferred  to  the  credit  of  the  public  service 
commission  of  the  first  district.  In  case  the  said  ap- 
propriation shall  not  be  sufficient  to  meet  such  salaries 
and  expenses,  the  comptroller  of  said  city  is  hereby 
authorized  and  directed  to  issue  and  sell  revenue  bonds 
of  said  city,  in  anticipation  of  receipt  of  taxes,  as  here- 
inbefore provided. 

2.  All  salaries  and  expenses  of  the  commission 
in  the  second  district  shall  be  audited  and  allowed 
by  the  state  comptroller  and  paid  monthly  by  the  state 
treasurer  upon  the  order  of  the  comptroller,  out  of  the 
funds  provided  therefor. 

§  15.  Certain  acts  prohibited.  Every  commis- 
sioner, counsel  to  a  commission,  the  secretary  of  a 
commission,  and  every  person  employed  or  appointed 
to  office,  either  by  a  commission,  or  by  the  counsel 
to  a  commission,  is  hereby  forbidden  and  prohibited 
to  solicit,  suggest,  request  or  recommend,  directly  or 
indirectly,  to  any  corporation  or  person  subject  to  the 


NEW   YORK   LAW.  697 

supervision  of  either  commission,  or  to  any  officer, 
attorney,  agent  or  employee  thereof,  the  appointment 
of  any  person  to  any  office,  place,  position  or  employ- 
ment. And  every  such  corporation  and  person,  and 
every  officer,  attorney,  agent  and  employee  thereof, 
is  hereby  forbidden  and  prohibited  to  offer  to  any  com- 
missioner, to  counsel  to  a  commission,  to  the  secretary 
thereof,  or  to  any  person  employed  by  a  commission 
or  by  the  counsel  to  a  commission,  any  office,  place, 
appointment  or  position,  or  to  offer  or  give  to  any 
commissioner,  to  counsel  to  a  commission,  to  the  sec- 
retary thereof,  or  to  any  officer  employed  or  appointed 
to  office  by  the  commission  or  by  the  counsel  to  the 
commission,  any  free  pass  or  transportation  or  any 
reduction  in  fare  to  which  the  public  generally  are  not 
entitled  or  free  carriage  for  property  or  any  present, 
gift  or  gratuity  of  any  kind.  If  any  commissioner, 
counsel  to  a  commission,  the  secretary  thereof  or  any 
person  employed  or  appointed  to  office  by  a  com- 
mission or  by  counsel  to  a  commission,  shall  violate 
any  provision  of  this  section  he  shall  be  removed  from 
the  office  held  by  him.  Every  commissioner,  counsel 
to  the  commission,  the  secretary  thereof  and  every 
person  employed  or  appointed  to  office  by  the  com- 
mission or  by  counsel  to  the  commission,  shall  be  and 
be  deemed  to  be  a  public  officer. 

§  16.  Reports  of  commissions,  i.  All  proceed- 
ings of  each  commission  and  all  documents  and  records 
in  its  possession  shall  be  public  records,  and  each 
commission  shall  make  an  annual  report  to  the  legis- 
lature on  or  before  the  second  Monday  of  January  in 
each  year,  which  shall  contain  copies  of  all  orders 
issued  by  it,  and  any  information  in  the  possession  of 
the  commission  which  it  shall  deem  of  value  to  the 
legislature  and  the  people  of  the  state.     Five  hundred 


698  PUBLIC   UTILITIES. 

copies  of  each  report,  together  with  abstracts  of  the 
reports  to  such  commission  of  corporations  and  per- 
sons subject  to  its  supervision,  in  addition  to  the  regu- 
lar number  prescribed  by  law,  shall  be  printed  as  a 
public  document  of  the  state,  bound  in  cloth,  for  the 
use  of  the  commissioners  and  to  be  distributed  by 
them  in  their  discretion  to  corporations  and  persons 
interested  therein. 

2.  Either  commission  shall  conduct  a  hearing  and 
take  testimony  relative  to  any  pending  legislation  with 
respect  to  any  person,  corporation  or  matter  within 
the  jurisdiction  of  the  commission,  if  requested  to  do 
so  by  the  legislature  or  by  either  branch  thereof  or  by 
a  standing  committee  of  either  branch  thereof  or  by 
the  governor  or  by  any  such  person  or  corporation, 
and  shall  report  its  conclusions  to  the  legislature.  The 
commission  may  also  recommend  the  enactment  of 
such  legislation  with  respect  to  any  matter  within  its 
jurisdiction  as  it  deems  wise  or  necessary  in  the  public 
interest. 

§  17.  Certified  copies  of  papers  filed  to  be  evi- 
dence. Copies  of  all  official  documents  and  orders 
filed  or  deposited  according  to  law  in  the  office  of 
either  commission,  certified  by  a  commissioner  or  by 
the  secretary  of  the  commission  to  be  true  copies  of 
the  originals,  under  the  official  seal  of  the  commission, 
shall  be  evidence  in  like  manner  as  the  originals. 

§  18.  Fees  to  be  charged  and  collected  by  the  com- 
missions. Each  commission  shall  charge  and  collect 
the  following  fees :  For  copies  of  papers  and  records 
not  required  to  be  certified  or  otherwise  authenticated 
by  the  commission,  ten  cents  for  each  folio;  for  cer- 
tified copies  of  official  documents  and  orders  filed  in  its 
office,   fifteen   cents  for  each  folio,  and  one   dollar  for 


NEW   YORK  LAW.  699 

every  certificate  under  seal  affixed  thereto;  for  certi- 
fying a  copy  of  any  report  made  by  a  corporation  to 
the  commission,  two  dollars;  for  each  certified  copy  of 
the  annual  report  of  the  commission,  one  dollar  and 
fifty  cents;  for  certified  copies  of  evidence  and  pro- 
ceedings before  the  commission,  fifteen  cents  for  each 
folio.  No  fees  shall  be  charged  or  collected  for  copies 
of  papers,  records  or  official  documents,  furnished  to 
public  officers  for  use  in  their  official  capacity,  or  for 
the  annual  reports  of  the  commission  in  the  ordinary 
course  of  distribution,  but  the  commission  may  fix 
reasonable  charges  for  publications  issued  under  its 
authority.  All  fees  charged  and  collected  by  the  com- 
mission of  the  first  district  shall  belong  to  the  city  of 
New  York,  and  shall  be  paid  monthly,  accompanied 
by  a  detailed  statement  thereof,  into  the  treasury  of 
the  city  to  the  credit  of  the  general  fund,  and  all  fees 
charged  and  collected  by  the  commission  of  the  sec- 
ond district  shall  belong  to  the  people  of  the  state, 
and  shall  be  paid  monthly,  accompanied  by  a  detailed 
statement  thereof,  into  the  treasury  of  the  state  to 
the  credit  of  the  general  fund. 

§  19.     Attendance     of    witnesses    and    their    fees. 

I.  All  subpcenas  shall  be  signed  and  issued  by  a 
commissioner  or  by  the  secretary  of  a  commission  and 
may  be  served  by  any  person  of  full  age.  The  fees 
of  witnesses  required  to  attend  before  a  commission, 
or  a  commissioner,  shall  be  two  dollars  for  each  day's 
attendance,  and  five  cents  for  every  mile  of  travel  by 
the  nearest  generally  traveled  route  in  going  to  and 
from  the  place  where  attendance  of  the  witness  is 
required,  such  fees  to  be  paid  when  the  witness  is 
excused  from  further  attendance;  and  the  disburse- 
ments made  in  the  payment  of  such  fees  shall  be 
audited  and  paid  in  the  first  district  in  the  same  man- 


7CX>  PUBLIC  UTILITIES. 

ner  provided  for  the  payment  of  expenses  of  the  com- 
mission. Whenever  a  subpoena  is  issued  at  the  in- 
stance of  a  complainant,  respondent,  or  other  party 
to  any  proceeding  before  the  commission,  the  cost  of 
service  thereof  and  the  fee  of  the  witness  shall  be 
borne  by  the  party  at  whose  instance  the  witness  is 
summoned.  A  subpoena  issued  as  aforesaid  shall  be 
served  in  the  same  manner  as  a  subpoena  issued  out 
of  a  court  of  record. 

2.  If  a  person  subpoenaed  to  attend  before  a 
commission  or  a  commissioner  fails  to  obey  the  com- 
mand of  such  subpoena,  without  reasonable  cause,  or 
if  a  person  in  attendance  before  a  commission  or  com- 
missioner shall,  without  reasonable  cause,  refuse  to 
be  sworn  or  to  be  examined  or  to  answer  a  question 
or  to  produce  a  book  or  papers,  when  ordered  so  to 
do  by  the  commission,  or  a  commissioner,  or  to  sub- 
scribe and  swear  to  his  deposition  after  it  has  been 
correctly  reduced  to  writing,  he  shall  be  guilty  of  a 
misdemeanor  and  may  be  prosecuted  therefor  in  any 
court  of  competent  criminal  jurisdiction. 

If  a  person  in  attendance  before  a  commission  or 
a  commissioner  refuses  without  reasonable  cause  to  be 
examined  or  to  answer  a  legal  and  pertinent  question 
or  produce  a  book  or  paper,  when  ordered  so  to  do  by 
a  commission  or  a  commissioner,  the  commission  may 
apply  to  any  justice  of  the  supreme  court  upon  proof 
by  affidavit  of  the  facts  for  an  order  returnable  in  not 
less  than  two  nor  more  than  five  days  directing  such 
person  to  show  cause  before  the  justice  who  made  the 
order,  or  any  other  justice  of  the  supreme  court,  why 
he  should  not  be  committed  to  jail;  upon  the  return 
of  such  order  the  justice  before  whom  the  matter  shall 
come  on  for  hearing  shall  examine  under  oath  such 
person  whose  testimony  may  be  relevant,  and  such 
person  shall  be  given  an  opportunity  to  be  heard;  and 


NEW   YORK  LAW.  7OI 

if  the  justice  shall  determine  that  such  person  has  re- 
fused without  reasonable  cause  or  legal  excuse  to  be 
examined,  or  to  answer  a  legal  and  pertinent  question, 
or  to  produce  a  book  or  paper  which  he  was  ordered 
to  bring,  he  may  forthwith,  by  warrant,  commit  the 
offender  to  jail,  there  to  remain  until  he  submits  to 
do  the  act  which  he  was  so  required  to  do  or  is  dis- 
charged according  to  law. 

§  20.  Practice  before  the  commissions ;  immunity 
of  witnesses.  All  hearings  before  a  commission  or  a 
commissioner  shall  be  governed  by  rules  to  be  adopted 
and  prescribed  by  the  commission.  And  in  all  inves- 
tigations, inquiries  or  hearings  the  commission  or  a 
commissioner  shall  not  be  bound  by  the  technical 
rules  of  evidence.  No  person  shall  be  excused  from 
testifying  or  from  producing  any  books  or  papers  in 
any  investigation  or  inquiry  by  or  upon  any  hearing 
before  a  commission  or  any  commissioner,  when  or- 
dered to  do  so  by  the  commission,  upon  the  ground 
that  the  testimony  or  evidence,  books  or  documents 
required  of  him  may  tend  to  incriminate  him  or  sub- 
ject him  to  penalty  or  forfeiture,  but  no  person  shall 
be  prosecuted,  punished  or  subjected  to  any  penalty 
or  forfeiture  for  or  on  account  of  any  act,  transaction, 
matter  or  thing  concerning  which  he  shall  under  oath 
have  testified  or  produced  documentary  evidence;  pro- 
vided, however,  that  no  person  so  testifying  shall  be 
exempt  from  prosecution  or  punishment  for  any  per- 
jury committed  by  him  in  his  testimony.  Nothing 
herein  contained  is  intended  to  give,  or  shall  be  con- 
strued as  in  any  manner  giving  unto  any  corporation 
immunity  of  any  kind. 

§21.  Court  proceedings;  preferences.  All  actions 
and    proceedings    under    this    chapter,    and    all    actions 


702  PUBLIC   UTILITIES. 

and  proceedings  commenced  or  prosecuted  by  order 
of  either  commission,  and  all  actions  and  proceedings 
to  which  either  commission  or  the  people  of  the  state 
of  New  York  may  be  parties,  and  in  which  any  ques- 
tion arises  under  this  chapter,  or  under  the  railroad 
law,  or  under  or  concerning  any  order  or  action  of 
the  commission,  shall  be  preferred  over  all  other  civil 
causes  except  election  causes  in  all  courts  of  the  state 
of  New  York  and  shall  be  heard  and  determined  in 
preference  to  all  other  civil  business  pending  therein 
excepting  election  causes,  irrespective  of  position  on 
the  calendar.  The  same  preference  shall  be  granted 
upon  application  of  counsel  to  the  commission  in  any 
action  or  proceeding  in  which  he  may  be  allowed  to 
intervene. 

§  22.  Rehearing  before  commission.  After  an  or- 
der has  been  made  by  a  commission  any  corporation 
or  person  interested  therein  shall  have  the  right  to  ap- 
ply for  a  rehearing  in  respect  to  any  matter  determined 
therein,  and  the  commission  shall  grant  and  hold 
such  a  rehearing  if  in  its  judgment  sufficient  reason 
therefor  be  made  to  appear;  if  a  rehearing  shall  be 
granted,  the  same  shall  be  determined  by  the  commis- 
sion within  thirty  days  after  the  same  shall  be  finally 
submitted.  An  application  for  such  a  rehearing  shall 
not  excuse  any  corporation  or  person  from  complying 
with  or  obeying  any  order  or  any  requirement  of  any 
order  of  the  commission,  or  operate  in  any  manner  to 
stay  or  postpone  the  enforcement  thereof  except  as 
the  commission  may  by  order  direct.  If,  after  such 
rehearing  and  a  consideration  of  the  facts,  including 
those  arising  since  the  making  of  the  order,  the  com- 
mission shall  be  of  opinion  that  the  original  order  or 
any  part  thereof  is  in  any  respect  unjust  or  unwar- 
ranted,   or   should  be    changed,    the   commission   may 


i 


NEW  YORK  LAW.  703 

abrogate  or  change  the  same.  An  order  made  after 
any  such  rehearing  abrogating  or  changing  the  original 
order  shall  have  the  same  force  and  effect  as  an  orig- 
inal order  but  shall  not  affect  any  right  or  the  enforce- 
ment of  any  right  arising  from  or  by  virtue  of  the 
original  order. 

§  2-^.  Service  and  effect  of  orders.  Every  order  of 
a  commission  shall  be  served  upon  every  person  or  cor- 
poration to  be  affected  thereby,  either  by  personal  de- 
livery of  a  certified  copy  thereof,  or  by  mailing  a  cer- 
tified copy  thereof,  in  a  sealed  package  with  postage 
prepaid,  to  the  person  to  be  affected  thereby  or,  in  the 
case  of  a  corporation,  to  any  officer  or  agent  thereof 
upon  whom  a  summons  may  be  served  in  accordance 
with  the  provisions  of  the  code  of  civil  procedure. 
It  shall  be  the  duty  of  every  person  and  corporation 
to  notify  the  commission  forthwith,  in  writing,  of  the 
receipt  of  the  certified  copy  of  every  order  so  served, 
and  in  the  case  of  a  corporation  such  notification 
must  be  signed  and  acknowledged  by  a  person  or 
officer  duly  authorized  by  the  corporation  to  admit 
such  service.  Within  a  time  specified  in  the  order  of 
the  commission  every  person  and  corporation  upon 
whom  it  is  served  must  if  so  required  in  the  order 
notify  the  commission  in  like  manner  whether  the 
terms  of  the  order  are  accepted  and  will  be  obeyed. 
Every  order  of  a  commission  shall  take  effect  at  a 
time  therein  specified  and  shall  continue  in  force  either 
for  a  period  which  may  be  designated  therein  or  until 
changed  or  abrogated  by  the  commission,  unless  such 
order  be  authorized  by  this  chapter  or  any  other  act  or 
be  in  violation  of  a  provision  of  the  constitution  of 
the  state  or  of  the  United  States. 

§  24.     Actions  to  recover  penalties   or  forfeitures. 


704  PUBLIC   UTILITIES. 

An  action  to  recover  a  penalty  or  a  forfeiture  under 
this  chapter  or  to  enforce  the  powers  of  the  commis- 
sion under  the  railroad  law  may  be  brought  in  any 
court  of  competent  jurisdiction  in  this  state  in  the 
name  of  the  people  of  the  state  of  New  York,  and 
shall  be  commenced  and  prosecuted  to  final  judgment 
by  counsel  to  the  commission.  In  any  such  action 
all  penalties  and  forfeitures  incurred  up  to  the  time  of 
commencing  the  same  may  be  sued  for  and  recovered 
therein,  and  the  commencement  of  an  action  to  recover 
a  penalty  or  forfeiture  shall  not  be,  or  be  held  to  be,  a 
waiver  of  the  right  to  recover  any  other  penalty  or 
forfeiture ;  if  the  defendant  in  such  action  shall  prove 
that  during  any  portion  of  the  time  for  which  it  is 
sought  to  recover  penalties  or  forfeitures  for  a  viola- 
tion of  an  order  of  the  commission  the  defendant  was 
actually  and  in  good  faith  prosecuting  a  suit,  action 
or  proceeding  in  the  courts  to  set  aside  such  order,  the 
court  shall  remit  the  penalties  or  forfeitures  incurred 
during  the  pendency  of  such  suit,  action  or  proceeding. 
All  moneys  recovered  in  any  such  action,  together  with 
the  costs  thereof,  shall  be  paid  into  the  state  treasury 
to  the  credit  of  the  general  fund.  Any  such  action 
may  be  compromised  or  discontinued  on  application 
of  the  commission  upon  such  terms  as  the  court  shall 
approve  and  order. 


NEW   YORK  LAW.  705 


ARTICLE  II. 

Provisions  Relating  to  Railroads,  Street  Railroads  and 
Common  Carriers. 

Section  25.  Application  of  article. 

26.  Adequate  service;  just  and  reasonable  *changes. 

27.  Switch  and  side-track  connections;    powers  of  commis- 

sions. 

28.  Tariff  schedules;  publication. 

29.  Changes  in  schedule;  notice  required. 

30.  Concurrence   in   joint   tariffs;    contracts,   agreements   or 

arrangements  between  any  carriers. 

31.  Unjust  discrimination. 

32.  Unreasonable  preference. 

33.  Transportation  prohibited  until  publication  of  schedules; 

rates  as  fixed  to  be  charged;  passes  prohibited. 

34.  False  billing,  et  cetera,  by  carrier  or  shipper. 

35.  Discrimination  prohibited;   connecting  lines. 

36.  Long  and  short  haul. 

37.  Distribution  of  cars. 

38.  Liability  for  damage  to  property  in  transit. 

39.  Continuous  carriage. 

40.  Liability  for  loss  or  damage  by  violation  of  this  chapter. 

§  25.  Application  of  article.  The  provisions  of 
this  article  shall  apply  to  the  transportation  of  pas- 
sengers or  property  from  one  point  to  another  within 
the  state  of  New  York,  and  to  any  common  carrier 
performing  such  service. 

§  26.  Safe  and  adequate  service ;  just  and  reason- 
able charges.  Every  corporation,  person  or  common 
carrier  performing  a  service  designated  in  the  preced- 
ing section,  shall  furnish,  with  respect  thereto,  such 
service  and  facilities  as  shall  be  safe  and  adequate  and 
in  all  respects  just  and  reasonable.     All  charges  made 

•  So  in  original. 
45— Pub.  Ut. 


706  PUBLIC   UTILITIES. 

or  demanded  by  any  such  corporation,  person  or  com- 
mon carrier  for  the  transportation  of  passengers  or 
property  or  for  any  service  rendered  or  to  be  rendered 
in  connection  therewith,  as  defined  in  section  two  of 
this  chapter,  shall  be  just  and  reasonable  and  not  more 
than  allowed  by  law  or  by  order  of  the  commission 
having  jurisdiction  and  made  as  authorized  by  this 
chapter.  Every  unjust  or  unreasonable  charge  made 
or  demanded  for  any  such  service  or  transportation  of 
passengers  or  property  or  in  connection  therewith  or 
in  excess  of  that  allowed  by  law  or  by  order  of  the 
commission  is  prohibited. 

§  27.  Switch  and  side-track  connections ;  powers 
of  commissions,  i.  A  railroad  corporation,  upon 
the  application  of  any  shipper  tendering  traffic  for 
transportation,  shall  construct,  maintain  and  operate 
upon  reasonable  terms  a  switch  connection  or  connec- 
tions with  a  lateral  line  of  railroad  or  private  side- 
track owned,  operated  or  controlled  by  such  shipper, 
and  shall,  upon  the  application  of  any  shipper,  provide 
upon  its  own  property  a  side-track  and  switch  con- 
nection with  its  line  of  railroad,  whenever  such  side- 
track and  switch  connection  is  reasonably  practicable, 
can  be  put  in  with  safety  and  the  business  therefor  is 
sufficient  to  justify  the  same. 

2.  If  any.  railroad  corporation  shall  fail  to  install 
or  operate  any  such  switch  connection  with  a  lateral 
line  of  railroad  or  any  such  side-track  and  switch  con- 
nection as  aforesaid,  after  written  application  therefor 
has  been  made  to  it,  any  corporation  or  person  inter- 
ested may  present  the  facts  to  the  commission  having 
jurisdiction  by  written  petition,  and  the  commission 
shall  investigate  the  matter  stated  in  such  petition,  and 
give  such  hearing  thereon  as  it  may  deem  necessary 
or  proper.     If  the  commission  be  of  opinion  that  it  is 


NEW  YORK  LAW.  707 

safe  and  practicable  to  have  a  connection,  substantially 
as  prayed  for,  established  or  maintained,  and  that  the 
business  to  be  done  thereon  justifies  the  construction 
and  maintenance  thereof,  it  shall  make  an  order  direct- 
ing the  construction  and  establishment  thereof,  speci- 
fying the  reasonable  compensation  to  be  paid  for  the 
construction,  establishment  and  maintenance  thereof, 
and  may  in  like  manner  upon  the  application  of  the 
railroad  corporation  order  the  discontinuance  of  such 
switch  connection. 

§28.  Tariff  schedules;  publication.  Every  com- 
mon carrier  shall  file  with  the  commission  having  juris- 
diction and  shall  print  and  keep  open  to  public  in- 
spection schedules  showing  the  rates,  fares  and  charges 
for  the  transportation  of  passengers  and  property 
within  the  state  between  each  point  upon  its  route  and 
all  other  points  thereon;  and  between  each  point  upon 
its  route  and  all  points  upon  every  route  leased,  op- 
erated or  controlled  by  it;  and  between  each  point  on 
its  route  or  upon  any  route  leased,  operated  or  con- 
trolled by  it  and  all  points  upon  the  route  of  any  other 
common  carrier,  whenever  a  through  route  and  joint 
rate  shall  have  been  established  or  ordered  between 
any  two  such  points.  If  no  joint  rate  over  a  through 
route  has  been  established,  the  several  carriers  in  such 
through  route  shall  file,  print  and  keep  open  to  public 
inspection,  as  aforesaid,  the  separately  established 
rates,  fares  and  charges  applied  to  the  through  trans- 
portation. The  schedules  printed  as  aforesaid  shall 
plainly  state  the  places  between  which  property  and 
passengers  will  be  carried,  and  shall  also  contain  the 
classification  of  passengers  or  property  in  force,  and 
shall  also  state  separately  all  terminal  charges,  storage 
charges,  icing  charges,  and  all  other  charges  which 
the  commission  may  require  to  be  stated,  all  privileges 


708  PUBLIC   UTILITIES. 

or  facilities  granted  or  allowed,  and  any  rules  or  regu- 
lations which  may  in  anywise  change,  affect  or  deter- 
mine any  part  or  the  aggregate  of,  such  aforesaid 
rates,  fares  and  charges,  or  the  value  of  the  service 
rendered  to  the  passenger,  shipper  or  consignee.  Such 
schedules  shall  be  plainly  printed  in  large  type,  and  a 
copy  thereof  shall  be  kept  by  every  such  carrier  read- 
ily accessible  to  and  for  convenient  inspection  by  the 
public  in  every  station  or  office  of  such  carrier  where 
passengers  or  property  are  respectively  received  for 
transportation,  when  such  station  or  office  is  in  charge 
of  an  agent,  and  in  every  station  or  office  of  such  car- 
rier where  passenger  tickets  for  transportation  or  tick- 
ets covering  sleeping  or  parlor  car  or  other  train  ac- 
commodation are  sold  or  bills  of  lading  or  receipts  for 
property  are  issued.  All  or  any  of  such  schedules  kept 
as  aforesaid  shall  be  immediately  produced  by  such 
carrier  for  inspection  upon  the  demand  of  any  person. 
A  notice  printed  in  bold  type  and  stating  that  such 
schedules  are  on  file  with  the  agent  and  open  to  in- 
spection by  any  person  and  that  the  agent  will  assist 
any  such  person  to  determine  from  such  schedules  any 
transportation  rates  or  fares  or  rules  or  regulations 
which  are  in  force  shall  be  kept  posted  by  the  carrier 
in  two  public  and  conspicuous  places  in  every  such 
station  or  office.  The  form  of  every  such  schedule 
shall  be  prescribed  by  the  commission  and  shall  con- 
form in  the  case  of  railroad  corporations  as  nearly  as 
may  be  to  the  form  of  schedule  required  by  the  inter- 
state commerce  commission  under  an  act  of  congress 
entitled  "An  act  to  regulate  commerce,"  approved  Feb- 
ruary fourth,  eighteen  hundred  and  eighty-seven  and 
the  acts  amendatory  thereof  and  supplementary  there- 
to. Where  any  similar  schedule  is  required  by  law  to 
be  filed  with  both  commissions  they  shall  agree  upon 
an  identical  form  for  such  schedule.     The  commission 


NEW   YORK  LAW.  709 

shall  have  power,  from  time  to  time,  in  its  discretion, 
to  determine  and  prescribe  by  order  such  changes  in 
the  form  of  such  schedules  as  may  be  found  expedient, 
and  to  modify  the  requirements  of  this  section  in 
respect  to  publishing,  posting  and  filing  of  schedules 
either  in  particular  instances  or  by  general  order  ap- 
plicable to  special  or  peculiar  circumstances  or  condi- 
tions. 

§  29.  Changes  in  schedule ;  notice  required.  Un- 
less the  commission  otherwise  orders  no  change  shall 
be  made  in  any  rate,  fare  or  charge,  or  joint  rate,  fare 
or  charge,  which  shall  have  been  filed  and  published 
by  a  common  carrier  in  compliance  with  the  require- 
ments of  this  chapter,  except  after  thirty  days'  notice 
to  the  commission  and  publication  for  thirty  days  as 
required  by  section  twenty-eight  of  this  chapter,  which 
shall  plainly  state  the  changes  proposed  to  be  made  in 
the  schedule  then  in  force,  and  the  time  when  the 
changed  rate,  fare  or  charge  will  go  into  effect;  and 
all  proposed  changes  shall  be  shown  by  printing,  filing 
and  publishing  new  schedules  or  shall  be  plainly  indi- 
cated upon  the  schedules  in  force  at  the  time  and  kept 
open  to  public  inspection.  The  commission,  for  good 
cause  shown,  may  allow  changes  in  rates  without  re- 
quiring the  thirty  days'  notice  and  publication  herein 
provided  for,  by  duly  filing  and  publishing  in  such  man- 
ner as  it  may  direct  an  order  specifying  the  change  so 
made  and  the  time  when  it  shall  take  effect;  all  such 
changes  shall  be  immediately  indicated  upon  its  sche- 
dules by  the  common  carrier. 

§  30.  Concurrence  in  joint  tariffs;  contracts,  agree- 
ments or  arrangements  between  any  carriers,     i.     The 

names  of  the  several  carriers  which  are  parties  to  any 
joint  tariff  shall  be  specified  therein,  and  each  of  the 


7IO  PUBLIC   UTILITIES. 

parties  thereto,  other  than  the  one  filing  the  same, 
shall  file  with  the  commission  such  evidence  of  con- 
currence therein  or  acceptance  thereof  as  may  be  re- 
quired or  approved  by  the  commission;  and  where 
such  evidence  of  concurrence  or  acceptance  is  filed,  it 
shall  not  be  necessary  for  the  carriers  filing  the  same 
also  to  file  copies  of  the  tariffs  in  which  they  are  named 
as  parties. 

2.  Every  common  carrier  shall  file  with  the  com- 
mission sworn  copies  of  every  contract,  agreement  or 
arrangement  with  any  other  common  carrier  or  com- 
mon carriers  relating  in  any  way  to  the  transportation 
of  passengers  or  property. 

§  31.  Unjust  discrimination.  No  common  carrier 
shall,  directly  or  indirectly,  by  any  special  rate,  rebate, 
drawback,  or  other  device  or  method,  charge,  demand, 
collect  or  receive  from  any  person  or  corporation  a 
greater  or  less  compensation  for  any  service  rendered 
or  to  be  rendered  in  the  transportation  of  passengers 
or  property,  except  as  authorized  in  this  chapter,  than 
it  charges,  demands,  collects  or  receives  from  any 
other  person  or  corporation  for  doing  a  like  and  con- 
temporaneous service  in  the  transportation  of  a  like 
kind  of  traffic  under  the  same  or  substantially  similar 
circumstances  and  conditions. 

§  32.  Unreasonable  preference.  No  common  car- 
rier shall  make  or  give  any  undue  or  unreasonable 
preference  or  advantage  to  any  person  or  corporation 
or  to  any  locality  or  to  any  particular  description  of 
traffic  in  any  respect  whatsoever,  or  subject  any  par- 
ticular person  or  corporation  or  locality  or  any  particu- 
lar description  of  traffic,  to  any  undue  or  unreasonable 
prejudice  or  disadvantage   in  any  respect  whatsoever. 


NEW   YORK  LAW.  7II 

§  33.  Transportation  prohibited  until  publication  of 
schedules;  rates  as  fixed  to  be  charged;  passes  pro- 
hibited. I.  No  common  carrier  subject  to  the  pro- 
vision of  this  chapter  shall  after  the  first  day  of  No- 
vember, nineteen  hundred  and  seven,  engage  or  par- 
ticipate in  the  transportation  of  passengers  or  prop- 
erty, between  points  within  the  state,  until  its  sche- 
dules of  rates,  fares  and  charges  shall  have  been  filed 
and  published  in  accordance  with  the  provisions  of 
this  chapter.  No  common  carrier  shall  charge,  de- 
mand, collect  or  receive  a  greater  or  less  or  different 
compensation  for  transportation  of  passengers  or  prop- 
erty, or  for  any  service  in  connection  therewith,  than 
the  rates,  fares  and  charges  applicable  to  such  trans- 
portation as  specified  in  its  schedules  filed  and  in  eflPect 
at  the  time;  nor  shall  any  such  carrier  refund  or  remit 
in  any  manner  or  by  any  device  any  portion  of  the 
rates,  fares  or  charges  so  specified,  nor  extend  to  any 
shipper  or  person  any  privileges  or  facilities  in  the 
transportation  of  passengers  or  property  except  such 
as  are  regularly  and  uniformly  extended  to  all  persons 
and  corporations  under  like  circumstances. 

2.  No  common  carrier  subject  to  the  provisions 
of  this  chapter  shall,  directly  or  indirectly,  issue  or 
give  any  free  ticket,  free  pass  or  free  transportation 
for  passengers  or  property  between  points  within  this 
state,  except  to  its  officers,  employees,  agents,  pen- 
sioners, surgeons,  physicians,  attorneys-at-law,  and 
their  families;  to  ministers  of  religion,  officers  and 
employees  of  railroad  young  men's  christian  associa- 
tions, inmates  of  hospitals,  charitable  and  eleemosy- 
nary institutions  and  persons  exclusively  engaged  in 
charitable  and  eleemosynary  work;  and  to  indigent, 
destitute  and  homeless  persons  and  to  such  persons 
when  transported  by  charitable  societies  or  hospitals, 
and  the  necessary  agents  employed  in   such   transpor- 


712  PUBLIC   UTILITIES. 

tation;  to  inmates  of  the  national  homes  or  state  homes 
for  disabled  volunteer  soldiers  and  of  soldiers'  and 
sailors'  homes,  including  those  about  to  enter  and 
those  returning  home  after  discharge,  and  boards  of 
managers  of  such  homes;  to  necessary  caretakers  of 
property  in  transit;  to  employees  of  sleeping-car  com- 
panies, express  companies,  telegraph  and  telephone 
companies  doing  business  along  the  line  of  the  issuing 
carrier;  to  railway  mail  service  employees,  post-office 
inspectors,  customs  inspectors  and  immigration  in- 
spectors; to  newsboys  on  trains,  baggage  agents,  wit- 
nesses attending  any  legal  investigation  or  proceeding 
in  which  the  common  carrier  is  interested,  persons  in- 
jured in  accidents  or  wrecks  and  physicians  and  nurses 
attending  such  persons;  to  the  carriage  free  or  at  re- 
duced rates  of  persons  or  property  for  the  United 
States,  state  or  municipal  governments,  or  of  property 
to  or  from  fairs  and  expositions  for  exhibit  thereat. 

3.  Nothing  in  this  chapter  shall  be  construed  to 
prohibit  the  interchange  of  free  or  reduced  transpor- 
tation between  common  carriers  of  or  for  their  officers, 
agents,  employees,  attorneys  and  surgeons,  and  their 
famihes,  nor  to  prohibit  any  common  carrier  from 
carrying  passengers  or  property  free,  with  the  object 
of  providing  relief  in  cases  of  general  epidemic,  pes- 
tilence or  other  calamitous  visitation;  nor  to  prohibit 
any  common  carrier  from  transporting  persons  or 
property  as  incident  to  or  connected  with  contracts  for 
construction,  operation  or  maintenance,  and  to  the 
extent  only  that  such  free  transportation  is  provided 
for  in  the  contract  for  such  work,  nor  to  prevent  any 
common  carrier  from  transporting  children  under  five 
years  of  age  free.  Provided  further,  that  nothing  in 
this  chapter  shall  prevent  the  issuance  of  mileage,  ex- 
cursion, school  or  family  commutation,  commutation 
passenger  tickets,  half  fare  tickets  for  the  transporta- 


NEW   YORK   LAW.  713 

tion  of  children  under  twelve  years  of  age,  or  any- 
other  form  of  reduced  rate  passenger  tickets,  or  joint 
interchangeable  mileage  tickets,  with  special  privileges 
as  to  the  amount  of  free  baggage  that  may  be  carried 
under  mileage  tickets  of  one  thousand  miles  or  more. 
But  before  any  common  carrier  subject  to  the  pro- 
vision of  this  chapter  shall  issue  any  such  mileage, 
excursion,  school  or  family  commutation,  commuta- 
tion, half  fare,  or  any  other  form  of  reduced  rate  pas- 
senger tickets,  or  joint  interchangeable  mileage  ticket, 
with  special  privileges  as  aforesaid,  it  shall  file  with 
the  commission  copies  of  the  tariffs  of  rates,  fares  or 
charges  on  which  such  tickets  are  to  be  based,  to- 
gether with  the  specifications  of  the  amount  of  free 
baggage  permitted  to  be  carried  under  such  joint 
interchangeable  mileage  ticket,  in  the  same  manner 
as  common  carriers  are  required  to  do  with  regard 
to  other  rates  by  this  chapter.  Nor  shall  anything 
in  this  chapter  prevent  the  issuance  of  passenger  trans- 
portation in  exchange  for  advertising  space  in  news- 
papers at  full  rates. 

4.  Nothing  in  this  section  or  in  any  other  provi- 
sion of  law  shall  be  deemed  to  limit  the  power  of  the 
commission  to  require  the  sale  of,  and  upon  investiga- 
tion prescribe  reasonable  and  just  fares  as  the  maxi- 
mum to  be  charged  for,  commutation,  school  or  fam- 
ily commutation,  mileage  tickets  over  railroads  or 
street  railroads,  joint  interchangeable  mileage  tickets, 
round  trip  excursion  tickets,  or  any  other  form  of  re- 
duced rate  passenger  tickets  over  such  railroads  or 
street  railroads;  provided  that  all  special  round  trip 
excursion  tickets,  the  sale  of  which  is  limited  to  less 
than  thirty  days,  except  round  trip  excursion  tickets 
to  the  State  Fair  and  return  during  the  holding  there- 

[Thus  amended  by  ch.  546,  L.  1911.] 


714  PUBLIC   UTILITIES. 

of,  shall  be  deemed  exempt  from  such  regulation  by 
the  commission. 

§  34.     False  billing,  et  cetera,  by  carrier  or  shipper. 

No  common  carrier  or  any  ofBcer  or  agent  thereof  or 
any  person  acting  for  or  employed  by  it,  shall  assist, 
suffer  or  permit  any  person  or  corporation  to  obtain 
transportation  for  any  passenger  or  property  between 
points  within  this  state  at  less  than  the  rates  then 
established  and  in  force  in  accordance  with  the  sche- 
dules filed  and  published  in  accordance  with  the  pro- 
visions of  this  chapter,  by  means  of  false  billing,  false 
classification,  false  weight  or  weighing,  or  false  report 
of  weight,  or  by  any  other  device  or  means.  No  per- 
son, corporation  or  any  officer,  agent  or  employee  of  a 
corporation,  who  shall  deliver  property  for  transporta- 
tion within  the  state  to  a  common  carrier,  shall  seek 
to  obtain  or  obtain  such  transportation  for  such  prop- 
erty at  less  than  the  rates  then  established  and  in  force 
therefor,  as  aforesaid,  by  false  billing,  false  or  incor- 
rect classification,  false  weight  or  weighing,  false  repre- 
sentation of  the  contents  of  a  package,  or  false  report 
or  statement  of  weight,  or  by  any  other  device  or 
means,  whether  with  or  without  the  consent  or  conniv- 
ance of  the  common  carrier,  or  any  of  its  officers, 
agents  or  employees. 

§35.     Discrimination  prohibited;   connecting  lines. 

Every  common  carrier  is  required  to  afford  all  reason- 
able, proper  and  equal  facilities  for  the  interchange 
of  passenger  and  property  traffic  between  the  lines 
owned,  operated,  controlled  or  leased  by  it  and  the 
lines  of  every  other  common  carrier,  and  for  the 
prompt  transfer  of  passengers  and  for  the  prompt  rcr 

[Thus  amended  by  ch.  546,  L.  1911.] 


NEW  YORK  LAW.  715 

ceipt  and  forwarding  of  property  to  and  from  its  said 
lines;  and  no  common  carrier  shall  in  any  manner  dis- 
criminate in  respect  to  rates,  fares  or  charges  or  in 
respect  to  any  service  or  in  respect  to  any  charges  or 
facilities  for  any  such  transfer  in  receiving  or  forward- 
ing between  any  two  or  more  other  common  carriers 
or  between  passengers  or  property  destined  to  points 
upon  the  lines  of  any  two  or  more  other  common  car- 
riers or  in  any  respect  with  reference  to  passengers  or 
property  transferred  or  received  from  any  two  or  more 
other  common  carriers.  This  section  shall  not  be  con- 
strued to  require  a  common  carrier  to  permit  or  allow 
any  other  common  carrier  to  use  its  tracks  or  terminal 
facilities.  Every  common  carrier,  as  such,  is  required 
to  receive  from  every  other  common  carrier,  at  a  con- 
necting point,  freight  cars  of  proper  standard,  and 
haul  the  same  through  to  destination,  if  the  destination 
be  upon  a  line  owned,  operated  or  controlled  by  such 
common  carrier,  or  if  the  destination  be  upon  a  line 
of  some  other  common  carrier,  to  haul  any  car  so 
delivered  through  to  the  connecting  point  upon  the 
line  owned,  operated,  controlled  or  leased  by  it,  by 
way  of  route  over  which  such  car  is  billed,  and  there 
to  deliver  the  same  to  the  next  connecting  carrier. 
Nothing  in  this  section  shall  be  construed  as  in  any- 
wise limiting  or  modifying  the  duty  of  a  common  car- 
rier to  establish  joint  rates,  fares  and  charges  for  the 
transportation  of  passengers  and  property  over  the 
lines  owned,  operated,  controlled  and  leased  by  it  and 
the  lines  of  other  common  carriers,  nor  as  in  any  man- 
ner limiting  or  modifying  the  power  of  the  commis- 
sion to  require  the  establishment  of  such  joint  rates, 
fares  and  charges.  A  railroad  corporation  and  a  street 
railroad  corporation  shall  not  be  required  to  inter- 
change cars  except  on  such  terms  and  conditions  as 
the  commission  may  direct. 


7l6  PUBLIC   UTILITIES. 

§  36.  Long  and  short  haul.  No  common  carrier, 
subject  to  the  provisions  of  this  chapter,  shall  charge 
or  receive  any  greater  compensation  in  the  aggregate 
for  the  transportation  of  passengers  or  of  a  like  kind  ^ 

of  property,  under  substantially  similar  circumstances  W 

and  conditions,  for  a  shorter  than  for  a  longer  distance 
over  the  same  line  in  the  same  direction,  the  shorter 
being  included  within  the  longer  distance;  but  this 
shall  not  be  construed  as  authorizing  any  such  com- 
mon carrier  to  charge  and  receive  as  great  a  compen- 
sation for  a  shorter  as  for  a  longer  distance  of  haul. 
Upon  appHcation  of  a  common  carrier  the  commission 
may  by  order  authorize  it  to  charge  less  for  longer 
than  for  shorter  distances  for  the  transportation  of 
passengers  or  property  in  special  cases  after  investi- 
gation by  the  commission,  but  the  order  must  specify 
and  prescribe  the  extent  to  which  the  common  carrier 
making  such  application  is  relieved  from  the  opera- 
tion of  this  section,  and  only  to  the  extent  so  specified 
and  prescribed  shall  any  common  carrier  be  relieved 
from  the  operation  and  requirements  of  this  section. 

§  37.  Distribution  of  cars.  i.  Every  railroad  cor- 
poration or  other  common  carrier  engaged  in  the  trans- 
portation of  property  shall,  upon  reasonable  notice, 
furnish  to  all  persons  and  corporations  who  may  apply 
therefor,  and  offer  property  for  transportation,  suf- 
ficient and  suitable  cars  for  the  transportation  of  such 
property  in  car-load  lots.  Every  railroad  corporation 
and  street  railroad  corporation  shall  have  sufficient 
cars  and  motive  power  to  meet  all  requirements  for 
the  transportation  of  passengers  and  property  which 
may  reasonably  be  anticipated,  unless  relieved  there- 
from by  order  of  the  commission.  In  case,  at  any  par- 
ticular time,  a  common  carrier  has  not  sufficient  cars 
to    meet    all    requirements    for    the    transportation    of 


NEW  YORK  LAW.  717 

property  in  car-load  lots,  all  cars  available  to  it  for  such 
purposes  shall  be  distributed  among  the  several  appli- 
cants therefor,  without  discrimination  between  ship- 
pers, localities  or  competitive  or  non-competitive 
points,  but  preference  may  always  be  given  in  the  sup- 
ply of  cars  for  shipment  of  live-stock  or  perishable 
property. 

2.  The  commission  shall  have  power  to  make,  and 
by  order  shall  make,  reasonable  regulations  for  the 
furnishing  and  distribution  of  freight  cars  to  shippers, 
for  the  switching  of  the  same,  for  the  loading  and 
unloading  thereof,  for  demurrage  charges  in  respect 
thereto,  and  for  the  weighing  of  cars  and  property 
offered  for  shipment  or  transported  by  any  common 
carrier. 

§  38.  Liability  for  damage  to  property  in  transit. 
Every  common  carrier  and  every  railroad  corporation 
and  street  railroad  corporation  shall,  upon  demand, 
issue  either  a  receipt  or  bill  of  lading  for  all  property 
delivered  to  it  for  transportation.  No  contract,  stipu- 
lation or  clause  in  any  receipt  or  bill  of  lading  shall 
exempt  or  be  held  to  exempt  any  common  carrier, 
railroad  corporation  or  street  railroad  corporation 
from  any  liability  for  loss,  damage  or  injury  caused 
by  it  to  property  from  the  time  of  its  delivery  for 
transportation  until  the  same  shall  have  been  received 
at  its  destination  and  a  reasonable  time  shall  have 
elapsed  after  notice  to  consignee  of  such  arrival  to 
permit  of  the  removal  of  such  property.  Every 
common  carrier,  railroad  corporation  and  street  rail- 
road corporation  shall  be  liable  for  all  loss,  damage  or 
injury  to  property  caused  by  delay  in  transit  due  to 
negligence  while  the  same  is  being  carried  by  it,  but 
in  any  action  to  recover  for  damages  sustained  by 
delay  in  transit  the  burden  of  proof  shall  be  upon  the 


7l8  PUBLIC   UTILITIES. 

defendant  to  show  that  such  delay  was  not  due  to 
negligence.  Every  common  carrier  and  railroad  cor- 
poration shall  be  liable  for  loss,  damage  and  injury  to 
property  carried  as  baggage  up  to  the  full  value  and 
regardless  of  the  character  thereof,  but  the  value  in 
excess  of  one  hundred  and  fifty  dollars  shall  be  stated 
upon  delivery  to  the  carrier,  and  a  written  receipt 
stating  the  value  shall  be  issued  by  the  carrier,  who 
may  make  a  reasonable  charge  for  the  assumption 
of  such  liability  in  excess  of  one  hundred  and  fifty 
dollars  and  for  the  carriage  of  baggage  exceeding  one 
hundred  and  fifty  pounds  in  weight  upon  a  single 
ticket.  Nothing  in  this  section  shall  deprive  any 
holder  of  such  receipt  or  bill  of  lading  of  any  remedy 
or  right  of  action  which  he  has  under  existing  law. 

§  39.  Continuous  carriage.  No  common  carrier 
shall  enter  into  or  become  a  party  to  any  combination, 
contract,  agreement  or  understanding,  written  or  oral, 
express  or  implied,  to  prevent  by  any  arrangement  or 
by  change  of  arrangement  of  time  schedule,  by  car- 
riage in  different  cars  or  by  any  other  means  or  device 
whatsoever  the  carriage  of  property  from  being  con- 
tinuous from  the  place  of  shipment  to  the  place  of 
destination.  No  breakage  of  bulk,  stoppage  or  inter- 
ruption of  carriage  made  by  any  common  carrier  shall 
prevent  the  carriage  of  property  from  being  treated 
as  one  continuous  carriage  from  the  place  of  shipment 
to  the  place  of  destination.  Nor  shall  any  such  break- 
age of  bulk,  stoppage  or  interruption  of  carriage  be 
made  or  permitted  by  any  common  carrier  except  it  be 
done  in  good  faith  for  a  necessary  purpose  without 
intention  to  avoid  or  unnecessarily  interrupt  or  delay 
the  continuous  carriage  of  such  property  or  to  evade 
any  of  the  provisions  of  law,  of  this  chapter  or  of  an 
order  of  the  commission. 


NEW  YORK  LAW.  7I9 

§  40.  Liability  for  loss  or  damage  caused  by  vio- 
lation of  this  chapter.  In  case  a  common  carrier  shall 
do,  cause  to  be  done  or  permit  to  be  done  any  act, 
matter  or  thing  prohibited,  forbidden  or  declared  to 
be  unlawful,  or  shall  omit  to  do  any  act,  matter  or 
thing  required  to  be  done,  either  by  any  law  of  the 
state  of  New  York,  by  this  chapter  or  by  an  order  of 
the  commission,  such  common  carrier  shall  be  liable 
to  the  persons  or  corporations  affected  thereby  for  all 
loss,  damage  or  injury  caused  thereby  or  resulting 
therefrom,  and  in  case  of  recovery,  if  the  court  shall 
find  that  such  act  or  omission  was  wilful,  it  may  in 
its  discretion  fix  a  reasonable  counsel  or  attorney's 
fee,  which  fee  shall  be  taxed  and  collected  as  part  of 
the  costs  in  the  case.  An  action  to  recover  for  such 
loss,  damage  or  injury  may  be  brought  in  any  court  of 
competent  jurisdiction  by  any  such  person  or  cor- 
poration. 


720  PUBLIC   UTILITIES. 


ARTICLE  III. 

Provisions  Relating  to  the  Powers  of  the  Commissions 
in  Respect  to  Common  Carriers,  Railroads  and 
Street  Railroads. 

Section  45.  General  powers  and  duties  of  commissions  in  respect  to 
common  carriers,  railroads  and  street  railroads. 

46.  Reports  of  common  carriers,  railroad  corporations  and 

street  railroad  corporations. 

47.  Investigation  of  accidents. 

48.  Investigations  by  commission. 

49.  Rates  and  service  to  be  fixed  by  the  commissions. 

50.  Power  of  commissions  to  order  repairs  or  changes. 

51.  Power  of  commissions  to  order  changes  in  time  sched- 

ules; running  of  additional  cars  and  trains. 

52.  Uniform  system  of  accounts;  access  to  accounts,  et  cet- 

era; forfeitures. 

53.  Franchises  and  privileges. 

54.  Transfer  of  franchises  or  stocks. 

55.  Approval  of  issues  of  stock,  bonds  and  other  forms  of  In- 

debtedness. 
55-a.  Reorganizations. 

56.  Forfeiture;  penalties. 

57.  Summary  proceedings. 

58.  Penalties  for  other  than  common  carriers. 

59.  Duties  of  commissions  as  to  interstate  traffic. 

§  45.  General  powers  and  duties  of  commissions 
in  respect  to  common  carriers,  railroads  and  street 
railroads,  i.  Each  commission  and  each  commis- 
sioner shall  have  power  and  authority  to  administer 
oaths,  in  all  parts  of  the  state,  to  witnesses  sum- 
moned to  testify  in  any  inquiry,  investigation,  hearing 
or  proceeding;  and  also  to  administer  oaths  in  all 
parts  of  the  state  whenever  the  exercise  of  such  power 
is  incidentally  necessary  or  proper  to  enable  the  com- 
mission or  a  commissioner  to  perform  a  duty  or  to 
exercise  a  power. 


f 


NEW   YORK  LAW.  72 1 

2.  Each  commission  shall  have  the  general  super- 
vision of  all  common  carriers,  railroads,  street  rail- 
roads, railroad  corporations  and  street  railroad  cor- 
porations within  its  jurisdiction  as  hereinbefore  de- 
fined, and  shall  have  power  to  and  shall  examine  the 
same  and  keep  informed  as  to  their  general  condition, 
their  capitalization,  their  franchises  and  the  manner 
in  which  their  lines  and  property,  owned,  leased,  con- 
trolled or  operated,  are  managed,  conducted  and  op- 
erated, not  only  with  respect  to  the  adequacy,  security 
and  accommodation  afforded  by  their  service,  but  also 
with  respect  to  their  compliance  with  all  provisions 
of  law,  orders  of  the  commission  and  charter  require- 
ments. Each  commission  shall  have  power,  either 
through  its  members  or  responsible  engineers  or  in- 
spectors duly  authorized  by  it,  to  enter  in  or  upon 
and  to  inspect  the  property,  equipment,  buildings, 
plants,  factories,  power-houses  and  offices  of  any  of 
such  corporations  or  persons,  including  the  right  for 
such  inspection  purpose  to  ride  upon  any  freight 
locomotive  or  train  or  any  passenger  locomotive  or 
train  while  in  service;  and  to  have  upon  reasonable 
notice  the  use  of  an  inspection  locomotive  or  special 
locomotive  and  inspection  car  for  a  physical  inspection 
once  annually  of  all  the  lines  and  stations  of  each  com- 
mon carrier  under  its  supervision;  and  to  the  extent 
that  such  facilities  for  inspection  involve  transporta- 
tion each  commissioner  and  each  such  employee  shall 
pay  the  published  one-way  fare  established  by  the 
common  carrier  for  the  transportation  of  persons  by 
regular  passenger  trains  over  the  distance  covered 
by  such  inspection.  The  cost  of  such  transportation, 
if  the  commission  so  elects,  may  be  paid  upon  bill 
rendered  to  the  commission  after  the  transportation 
has  been  furnished  and  the  amount  thereof  ascertained. 

3.  Each   commission  and  each  commissioner   shall 
46— Pub.  Ut. 


722  PUBLIC   UTILITIES. 

have  power  to  examine  all  books,  contracts,  records, 
documents  and  papers  of  any  person  or  corporation 
subject  to  its  supervision,  and  by  subpoena  duces  tecum 
to  compel  production  thereof.  In  lieu  of  requiring 
production  of  originals  by  subpoena  duces  tecum,  the 
commission  or  any  commissioner  may  require  sworn 
copies  of  any  such  books,  records,  contracts,  docu- 
ments and  papers  or  parts  thereof  to  be  filed  with  it. 

§  46.  Reports  of  common  carriers,  railroad  cor- 
porations and  street  railroad  corporations,  i.  Every 
common  carrier,  railroad  corporation  and  street  rail- 
road corporation  shall  file  an  annual  report  with  the 
commission  verified  by  the  oath  of  the  president, 
treasurer,  general  manager  or  receiver,  if  any,  of  such 
corporation,  or  by  the  person  required  to  file  the 
same.  The  verification  shall  be  made  by  said  official 
holding  office  at  the  time  of  the  filing  of  the  said 
report,  and  if  not  made  upon  the  knowledge  of  the 
person  verifying  the  same  shall  set  forth  the  sources 
of  his  information  and  the  grounds  of  his  belief  as  to 
any  matters  not  stated  to  be  verified  upon  his  knowl- 
edge. The  commission  shall  prescribe  the  form  of 
such  reports  and  the  character  of  the  information  to 
be  contained  therein,  and  may  from  time  to  time  make 
such  changes  and  such  additions  in  regard  to  form 
and  contents  thereof  as  it  may  deem  proper,  and  on 
or  before  June  thirtieth  in  each  year  shall  furnish  a 
blank  form  for  such  annual  reports  to  every  such 
corporation  and  person.  The  contents  of  such  report 
and  the  form  thereof  shall  conform  in  the  case  of  rail- 
road corporations  as  nearly  as  may  be  to  that  required 
of  common  carriers  under  the  provisions  of  the  act 
of  congress  entitled  "An  act  to  regulate  commerce," 
approved  February  fourth,  eighteen  hundred  and 
eighty-seven,    and    the    acts    amendatory    thereof    and 


NEW  YORK  LAW.  723 

supplementary  thereto.  The  commission  may  require 
such  report  to  contain  information  in  relation  to  rates 
or  regulations  concerning  fares  or  freights,  agreements 
or  contracts  affecting  the  same,  so  far  as  such  rates 
or  regulations  pertain  to  transportation  within  the 
state.  When  the  report  of  any  such  corporation  or 
person  is  defective,  or  believed  to  be  erroneous,  the 
commission  shall  notify  the  corporation  or  person  to 
amend  the  same  within  a  time  prescribed  by  the  com- 
mission. The  originals  of  the  reports,  subscribed  and 
sworn  to  as  prescribed  by  law,  shall  be  preserved  in 
the  office  of  the  commission.  The  commission  may 
also  require  such  corporations  and  persons  to  file 
periodic  reports  in  the  form,  covering  the  period  and 
at  the  time  prescribed  by  the  commission.  The  com- 
mission may  require  of  any  such  corporation  or  person 
specific  answers  to  questions  upon  which  the  commis- 
sion may  need  information.  The  annual  report  re- 
quired to  be  filed  by  a  common  carrier,  railroad  or 
street  railroad  corporation  shall  be  so  filed  on  or  before 
the  thirtieth  day  of  September  in  each  year.  The 
commission  may  extend  the  time  for  making  and  filing 
such  report  for  a  period  not  exceeding  sixty  days.  If 
such  corporation  or  person  shall  fail  to  make  and  file 
the  annual  report  within  the  time  above  specified  or 
within  the  time  as  extended  by  the  commission,  or 
shall  fail  to  amend  such  report  within  such  reasonable 
time  as  may  be  prescribed  by  the  commission,  or 
shall  fail  to  make  specific  answer  to  any  question,  or 
shall  fail  to  make  the  periodic  reports  when  required 
by  the  commission  as  herein  provided,  within  the  time 
and  in  the  form  prescribed  by  the  commission  for  the 
making  and  filing  of  any  such  report  or  answer,  such 
corporation  or  person  shall  forfeit  to  the  state  the 
sum  of  one  hundred  dollars  for  each  and  every  day 
it  shall  continue  to  be  in  default  with  respect  to  such 


7^4  PUBLIC   UTILITIES. 

annual  report,  amendment,  answer  or  periodic  report. 
Such  forfeiture  shall  be  recovered  in  an  action  brought 
by  the  commission  in  the  name  of  the  people  of  the 
state  of  New  York.  The  amount  recovered  in  any- 
such  action  shall  be  paid  into  the  state  treasury  and 
credited  to  the  general  fund.  Any  railroad  corpora- 
tion or  common  carrier  other  than  a  street  railroad 
corporation  operating  partly  within  the  second  district 
and  partly  within  the  first  district  shall  report  to  the 
commission  of  the  second  district;  but  the  commission 
of  the  first  district  may,  upon  reasonable  notice,  require 
a  special  report  from  such  railroad  corporation  or  com- 
mon carrier.  Any  street  railroad  corporation  operat- 
ing partly  within  the  first  district  and  partly  within  the 
second  district  shall  report  to  the  commission  of  the 
first  district;  but  the  commission  of  the  second  dis- 
trict may,  upon  reasonable  notice,  require  a  special 
report  from  such  street  railroad  corporation. 

§  47.  Investigation  of  accidents.  Each  commis- 
sion shall  investigate  the  cause  of  all  accidents  on  any 
railroad  or  street  railroad  within  its  district  which  re- 
sult in  loss  of  life  or  injury  to  persons  or  property,  and 
which  in  its  judgment  shall  require  investigation. 
Every  common  carrier,  railroad  corporation  and  street 
railroad  corporation  is  hereby  required  to  give  imme- 
diate notice  to  the  commission  of  every  accident  hap- 
pening upon  any  line  of  railroad  or  street  railroad 
owned,  operated,  controlled  or  leased  by  it,  within 
the  territory  over  which  such  commission  has  juris- 
diction in  such  manner  as  the  commission  may  direct. 
Such  notice  shall  not  be  admitted  as  evidence  or  used 
for  any  purpose  against  such  common  carrier,  railroad 
corporation  or  street  railroad  corporation  giving  such 
notice  in  any  suit  or  action  for  damages  growing  out 
of  any  matter  mentioned  in  said  notice. 


NEW  YORK  LAW.  725 

§  48.  Investigations  by  commission,  i .  Each 
commission  may,  of  its  own  motion,  investigate  or 
make  inquiry,  in  a  manner  to  be  determined  by  it,  as 
to  any  act  or  thing  done  or  omitted  to  be  done  by  any 
common  carrier,  railroad  corporation  or  street  railroad 
corporation,  subject  to  its  supervision,  and  the  com- 
mission must  make  such  inquiry  in  regard  to  any  act 
or  thing  done  or  omitted  to  be  done  by  any  such 
common  carrier,  railroad  corporation  or  street  rail- 
road corporation  in  violation  of  any  provision  of  law 
or  in  violation  of  any  order  of  the  commission. 

2.  Complaints  may  be  made  to  the  proper  com- 
mission by  any  person  or  corporation  aggrieved,  by 
petition  or  complaint  in  writing  setting  forth  any  thing 
or  act  done  or  omitted  to  be  done  by  any  common 
carrier,  railroad  corporation  or  street  railroad  corpo- 
ration in  violation,  or  claimed  to  be  in  violation,  of 
any  provision  of  law  or  of  the  terms  and  conditions 
of  its  franchise  or  charter  or  of  any  order  of  the  com- 
mission. Upon  the  presentation  of  such  a  complaint 
the  commission  shall  cause  a  copy  thereof  to  be  for- 
warded to  the  person  or  corporation  complained  of, 
which  may  be  accompanied  by  an  order,  directed  to 
such  person  or  corporation,  requiring  that  the  matters 
complained  of  be  satisfied,  or  that  the  charges  be 
answered  in  writing  within  a  time  to  be  specified  by 
the  commission.  If  the  person  or  corporation  com- 
plained of  shall  make  reparation  for  any  injury  alleged 
and  shall  cease  to  commit,  or  to  permit,  the  violation 
of  law,  franchise  or  order  charged  in  the  complaint, 
and  shall  notify  the  commission  of  that  fact  before 
the  time  allowed  for  answer,  the  commission  need 
take  no  further  action  upon  the  charges.  If,  however, 
the  charges  contained  in  such  petition  be  not  thu? 
satisfied,  and  it  shall  appear  to  the  commission  that 
there   are   reasonable   grounds   therefor,   it   shall   inves- 


^26  PUBLIC   UTILITIES. 

tigate  such  charges  in  such  manner  and  by  such  means 
as  it  shall  deem  proper,  and  take  such  action  within 
its  powers  as  the  facts  justify. 

3.  Whenever  either  commission  shall  investigate 
any  matter  complained  of  by  any  person  or  corpora- 
tion aggrieved  by  any  act  or  omission  of  a  common 
carrier,  railroad  corporation  or  street  railroad  corpo- 
ration under  this  section  it  shall  be  its  duty  to  make 
and  file  an  order  either  dismissing  the  petition  or 
complaint  or  directing  the  common  carrier,  railroad 
corporation  or  street  railroad  corporation  complained 
of  to  satisfy  the  cause  of  complaint  in  whole  or  to  the 
extent  which  the  commission  may  specify  and  require. 

§  49.  Rates  and  service  to  be  fixed  by  the  com- 
mission. I.  Whenever  either  commission  shall  be  of 
opinion,  after  a  hearing  had  upon  its  own  motion  or 
upon  a  complaint,  that  the  rates,  fares  or  charges  de- 
manded, exacted,  charged  or  collected  by  any  common 
carrier,  railroad  corporation  or  street  railroad  corpo- 
ration subject  to  its  jurisdiction  for  the  transportation 
of  persons  or  property  within  the  state,  or  that  the 
regulations  or  practices  of  such  common  carrier,  rail- 
road corporation  or  street  railroad  corporation  affect- 
ing such  rates  are  unjust,  unreasonable,  unjustly  dis- 
criminatory or  unduly  preferential,  or  in  anywise  in 
violation  of  any  provision  of  law,  or  that  the  maxi- 
mum rates,  fares  or  charges,  chargeable  by  any  such 
common  carrier,  railroad  or  street  railroad  corpora- 
tion are  insufficient  to  yield  reasonable  compensation 
for  the  service  rendered,  and  are  unjust  and  unrea- 
sonable, the  commission  shall  with  due  regard  among 
other  things  to  a  reasonable  average  return  upon  the 
value  of  the  property  actually  used  in  the  public  service 
and  to  the  necessity  of  making  reservation  out  of  in- 
come for  surplus  and  contingencies,  determine  the  just 


NEW   YORK   LAW.  727 

and  reasonable  rates,  fares  and  charges  to  be  thereafter 
observed  and  in  force  as  the  maximum  to  be  charged 
for  the  service  to  be  performed,  notwithstanding  that 
a  higher  rate,  fare  or  charge  has  been  heretofore  au- 
thorized by  statute,  and  shall  fix  the  same  by  order 
to  be  served  upon  all  common  carriers,  railroad  cor- 
porations or  street  railroad  corporations  by  whom  such 
rates,  fares  and  charges  are  thereafter  to  be  observed. 
\\'henever  either  commission  shall  be  of  the  opinion, 
after  a  hearing  had  upon  its  own  motion,  or  upon  a 
complaint,  that  the  rates,  fares  or  charges  demanded, 
exacted,  charged  or  collected  by  any  common  carrier, 
railroad  corporation  or  street  railroad  corporation  sub- 
ject to  its  jurisdiction  for  excursion,  school  or  family 
commutation,  commutation  passenger  tickets,  half 
fare  tickets  for  the  transportation  of  children  under 
six  years  of  age,  or  any  other  form  of  reduced  rate 
tickets  for  the  transportation  of  persons  within  the 
state,  or  joint  interchangeable  mileage  tickets,  with 
special  privileges  as  to  the  amount  of  free  baggage 
that  may  be  carried  under  mileage  tickets  of  one 
thousand  miles  or  more  within  the  state,  or  that  the 
regulations  or  practices  of  such  common  carrier,  rail- 
road corporation  or  street  railroad  corporation  affect- 
ing such  rates  are  unjust,  unreasonable,  unjustly  dis- 
criminatory or  unduly  preferential,  or  in  anywise  in 
violation  of  any  provision  of  law,  or  that  the  maxi- 
mum rates,  fares  or  charges  collected  or  charged  for 
any  of  such  forms  of  reduced  fare  passenger  trans- 
portation tickets  by  any  such  common  carrier,  rail- 
road or  street  railroad  corporation  are  insufficient  to 
yield  reasonable  compensation  for  the  service  ren- 
dered, and  are  unjust  and  unreasonable,  and  whenever 
the  commission  shall  be  of  the  opinion,  after  a  hearing 
had  upon  its  own  motion  or  upon  a  complaint,  and 
upon  investigation,  that  the  sale  of  any  form  or  forms 


728  PUBLIC   UTILITIES. 

of  reduced  fare  passenger  ticket  heretofore  sold  or 
used  upon  any  railroad  or  street  railroad  within  the 
state  of  New  York,  the  use  or  sale  of  which  ticket 
or  tickets  has  been  discontinued  within  five  years 
prior  to  the  time  this  act  takes  effect,  will  be  just  and 
reasonable  and  not  in  violation  of  any  provision  of 
this  act  or  other  provision  of  law,  the  commission 
shall,  with  due  regard,  among  other  things,  to  a  rea- 
sonable average  return  upon  the  value  of  the  prop- 
erty actually  used  in  the  public  service  and  to  the 
necessity  of  making  reservation  out  of  income  for 
surplus  and  contingencies,  determine  the  just  and 
reasonable  rates,  fares  and  charges  to  be  thereafter 
observed  and  enforced  as  the  maximum  to  be  charged 
for  such  mileage,  excursion,  school  or  family  com- 
mutation, commutation,  half  fare  or  any  other  form 
of  reduced  rate  tickets  for  the  transportation  of  per- 
sons, or  joint  interchangeable  mileage  tickets  with 
special  privileges  as  aforesaid,  and  shall  order  the  sale 
and  use  thereof  to  be  restored,  of  any  of  the  kinds 
of  tickets  herein  specified  or  any  other  form  of  re- 
duced rate  ticket  for  the  transportation  of  persons 
within  the  state,  upon  any  railroad  or  street  railroad 
within  this  state,  upon  which  railroad  or  street  rail- 
road any  such  form  of  ticket  or  tickets  for  the  trans- 
portation of  persons  within  the  state,  have,  within  five 
years  prior  to  the  time  this  act  takes  effect,  been  sold 
or  used,  and  shall  determine  and  prescribe  the  rea- 
sonable and  just  rates,  fares  and  charges  to  be  there- 
after observed  and  enforced  as  the  maximum  to  be 
charged  for  any  of  such  form  of  ticket  or  tickets  for 
the  transportation  of  persons  within  the  state,  all  of 
which  acts  fixing  such  rates,  fares  and  charges  or 
requiring  the  restoration  of,  sale  and  use  of  any  of 
such  forms  of  ticket  or  tickets,  shall  be  by  order  to  be 
served  upon  all  common  carriers,  railroad  corporations 


NEW   YORK  LAW.  729 

and  street  railroad  corporations  by  whom  such  rate, 
fares  and  charges  or  restoration  of,  sale  or  use  of, 
such  ticket  or  tickets  are  thereafter  to  be  observed. 

2.  Whenever  the  commission  shall  be  of  opinion, 
after  a  hearing,  had  upon  its  own  motion  or  upon 
complaint,  that  the  regulations,  practices,  equipment, 
appliances,  or  service  of  any  such  common  carriers, 
railroad  corporation  or  street  railroad  corporation  in 
respect  to  transportation  of  persons  or  property  within 
the  state  are  unjust,  unreasonable,  unsafe,  improper 
or  inadequate,  the  commission  shall  determine  the 
just,  reasonable,  safe,  adequate  and  proper  regulations, 
practices,  equipment,  appliances  and  service  thereafter 
to  be  in  force,  to  be  observed  and  to  be  used  in  such 
transportation  of  persons  and  property  and  so  fix  and 
prescribe  the  same  by  order  to  be  served  upon  every 
common  carrier,  railroad  corporation  and  street  rail- 
road corporation  to  be  bound  thereby;  and  thereafter 
it  shall  be  the  duty  of  every  common  carrier,  railroad 
corporation  and  street  railroad  corporation  to  observe 
and  obey  each  and  every  requirement  of  every  such 
order  so  served  upon  it,  and  to  do  everything  neces- 
sary or  proper  in  order  to  secure  absolute  compliance 
with  and  observance  of  every  such  order  by  all  of  its 
officers,  agents  and  employees. 

3.  The  commission  shall  have  power  by  order  to 
require  any  two  or  more  common  carriers,  railroad 
corporations  or  street  railroad  corporations,  whose 
lines,  owned,  operated,  controlled  or  leased,  form  a 
continuous  or  connecting  line  of  transportation  or 
could  be  made  to  do  so  by  the  construction  and  main- 
tenance of  switch  connection  or  interchange  track  at 
connecting  points,  or  by  transfer  of  property  or  pas- 
sengers   at    connecting    points,    to    establish    through 

[Thus  amended  by  ch.  546,  L.  1911.] 


730  PUBLIC   UTILITIES. 

routes  and  joint  rates,  fares  and  charges  for  the  trans- 
portation of  passengers  and  property  within  the  state 
as  the  commission  may,  by  its  order,  designate;  and 
in  case  such  through  routes  and  joint  rates  be  not 
established  by  the  common  carriers,  railroad  corpora- 
tions and  street  railroad  corporations  named  in  any 
such  order  within  the  time  therein  specified,  the  com- 
mission shall  establish  just  and  reasonable  rates,  £ai,cj» 
and  charges  to  be  charged  for  such  through  transpor- 
tation, and  declare  the  portion  thereof  to  which  each 
common  carrier,  railroad  corporation  or  street  railroad 
corporation  affected  thereby  shall  be  entitled  and  the 
manner  in  which  the  same  shall  be  paid  and  secured; 
and  the  commission  shall  also  have  power  in  the  same 
proceeding,  or  in  a  separate  proceeding  involving  any 
rates,  fares  or  charges,  to  prescribe  joint  rates  and 
fares  and  charges  as  the  maximum  to  be  exacted  for 
the  transportation  by  them  of  passengers  and  prop- 
erty within  the  state,  and  to  require  such  common 
carriers,  railroad  corporations  and  street  railroad  cor- 
porations affected  thereby  to  make  within  a  specified 
time  an  agreement  between  them  as  to  the  portion  of 
such  joint  rates,  fares  or  charges  to  which  each  of 
them  shall  be  entitled;  and  in  case  such  agreement  be 
not  so  made  within  the  time  so  specified  the  commis- 
sion may  declare  by  supplemental  order  the  portion 
thereof  to  which  each  common  carrier,  railroad  cor- 
poration or  street  railroad  corporation  affected  there- 
by shall  be  entitled  and  the  manner  in  which  the  same 
shall  be  paid  and  secured;  such  supplemental  order 
shall  take  effect  as  part  of  the  original  order  from 
the  time  such  supplemental  order  shall  become  effec- 
tive. 

4.  If  the  commission  shall  be  of  the  opinion  that 
through  cars  for  the  transportation  of  property  should 
be  operated  over  the  tracks  of  said  common  carriers. 


NEW  YORK  LAW.  .  73 1 

railroad  corporations  and  street  railroad  corporations 
and  that  switch  connection  or  interchange  track  at  a 
connecting  point,  if  not  already  existing,  should  be 
constructed  and  maintained  by  such  common  carriers, 
railroad  corporations  and  street  railroad  corporations, 
to  the  end  that  property  may  be  carried  without 
change  of  cars,  the  commission  shall  have  power  after 
a  hearing  to  require  by  order  said  common  carriers, 
railroad  corporations  and  street  railroad  corporations 
to  receive  from  each  other  and  transport  for  each 
other  such  cars  over  each  other's  tracks  by  way  of 
such  switch  connection  or  interchange  track,  and  if  no 
such  switch  connection  or  interchange  track  exist  to 
construct  and  maintain  said  switch  connection  or  in- 
terchange track,  and  to  make  within  a  specified  time 
not  less  than  thirty  days  an  agreement  between  them 
as  to  the  terms  of  such  receipt  and  transportation  of 
cars,  and  if  so  required  as  to  the  division  of  the  ex- 
pense of  such  construction  and  maintenance  of  switch 
connection  or  interchange  track;  and  in  case  such 
agreement  be  not  so  made  within  the  time  so  speci- 
fied, the  commission  shall  after  a  hearing  declare  by 
supplemental  order  the  terms  and  conditions  upon 
which  such  cars  shall  be  received  and  transported, 
and  if  so  required  the  portion  of  such  expense  to  which 
each  common  carrier  or  corporation  affected  thereby 
shall  be  entitled  and  the  manner  in  which  any  sums 
of  money  to  which  any  such  common  carrier  or  cor- 
poration is  entitled  shall  be  paid  and  secured,  and  such 
supplemental  order  shall  take  effect  as  part  of  the 
original  order  from  the  time  such  supplemental  order 
shall  become  effective.  Nothing  in  this  subdivision 
shall  be  construed  to  require  a  through  route  between 
railroad  corporations  and  street  railroad  corporations 
between  points  reached  by  such  railroad  corporations. 
5.     Whenever  the  case  shall  relate  to  a  joint  rate, 


732  PUBLIC   UTILITIES. 

fare  or  charge,  or  a  through  route  composed  of  a  street 
railroad  wholly  in  the  second  district  and  a  street  rail- 
road wholly  in  the  first  district,  or  partly  in  the  first 
and  partly  in  the  second  district,  the  proceeding  shall 
be  deemed  pending  before  both  commissions.  In  such 
case  and  in  every  other  case  arising  under  this  chapter 
wherein  it  appears  to  both  commissions  that  separate 
jurisdiction  has  not  been  conferred,  a  joint  hearing 
shall  be  fixed  and  had  by  members  of  both  commis- 
sions, and  the  determination  shall  be  by  joint  order, 
which  shall  be  effective  when  concurred  in  by  not  less 
than  three  members  of  each  commission,  anything  in 
this  chapter  to  the  contrary  notwithstanding.  In  any 
such  case  the  proceeding  may  be  instituted  by  or  be- 
fore either  commission  and  the  entry  and  service  of 
preliminary  orders  may  be  by  such  commission. 

6.  Whenever  the  commission  shall  be  of  the  opin- 
ion after  a  hearing  that  the  practices  and  service  and 
the  rules  and  regulations  affecting  the  same  of  any 
street  railroad  corporation  which  is  within  its  juris- 
diction are  as  to  transportation  upon  the  street  sur- 
face railroads  of  said  corporation  by  use  of  transfers 
given  to  each  passenger  paying  one  single  fare  unjust  I 

and    unreasonable    either    as    to    persons    transported  | 

upon   said   street   surface   railroads   or  as   to   any   such  | 

street   railroad   corporation,    the    commission   shall   de-  ^ 

termine  and  prescribe  by  order  the  just  and  reasonable  m 

service   and   rules   and   regulations   affecting  the   same  ™ 

thereafter  to  be  maintained  and  observed  by  said 
street  railroad  corporation  (a)  as  to  the  distance  over 
which  a  passenger  shall  by  such  transfer  be  transported 
by  it  upon  said  street  surface  railroads  for  a  single 
fare;  (b)  the  number  of  successive  transfers  to  be 
given  by  it  to  a  passenger  paying  one  single  fare  for 
transportation  over  said  street  surface  railroads;  and 
(c)   as  to  the  prompt  use  by  each  passenger  of  such 


I 


NEW  YORK  LAW.  733 

transfer  given  him  for  one  single  fare  paid  by  him  in 
making  his  continuous  trip  over  said  street  surface 
railroads.  And  it  shall  thereupon  be  the  duty  of  every 
such  street  railroad  corporation  to  obey  each  require- 
ment of  every  such  order  served  upon  it  and  to  do 
everything  necessary  and  proper  in  order  to  secure 
compliance  with  and  observance  of  every  such  order 
by  all  of  its  officers,  agents  and  employees.  But 
nothing  herein  contained  shall  affect  or  modify  the 
terms  of  a  certain  contract  bearing  date  January  first, 
eighteen  hundred  and  ninety-two,  entered  into  by  and 
between  the  city  of  Buffalo  and  the  various  street 
surface  railroad  corporations  therein  named  in  said 
contract. 

7.  Until  and  except  as  the  public  service  commis- 
sion shall  otherwise  prescribe  as  to  any  street  rail- 
road corporation  or  corporations  pursuant  to  the  pro- 
visions of  this  chapter,  every  street  surface  railroad 
corporation  entering  into  a  contract  with  another  such 
corporation  as  provided  in  section  seventy-eight  of  the 
railroad  law  shall  carry  or  permit  any  other  party 
thereto  to  carry  between  any  two  points  on  the  rail- 
roads or  portions  thereof  embraced  in  such  contract 
any  passenger  desiring  to  make  one  continuous  trip 
between  such  points  for  one  single  fare,  not  higher 
than  the  fare  lawfully  chargeable  by  either  of  such 
corporations  for  an  adult  passenger.  Every  such  cor- 
poration shall  upon  demand,  and  without  extra  charge, 
give  to  each  passenger  paying  one  single  fare  a  trans- 
fer entitling  such  passenger  to  one  continuous  trip  to 
any  point  or  portion  of  any  railroad  embraced  in  such 
contract,  to  the  end  that  public  convenience  may  be 
promoted  by  the  operation  of  the  railroads  embraced 
in  such  contract  substantially  as  a  single  railroad  with 
a  single  rate  of  fare.  For  every  refusal  to  comply 
with   the   requirements   of   this    subdivision   the    corpo- 


734  PUBLIC   UTILITIES. 

ration  so  refusing  shall  forfeit  fifty  dollars  to  the  ag- 
grieved party.  The  provisions  of  this  subdivision  shall 
only  apply  to  railroads  wholly  within  the  limits  of 
any  one  incorporated  city  or  village. 

8.  No  passenger  joint  rate,  fare,  charge,  through 
route  or  transfer  shall  be  required  between  any  rapid 
transit  railroad  and  any  other  rapid  transit  railroad  or 
any  railroad  operated  as  a  street  surface  railroad,  nor 
between  a  street  surface  railroad  and  any  railroad 
operated  wholly  by  steam,  or  any  railroad  operated  a 
distance  of  over  fifty  miles  partly  by  steam  and  partly 
by  electricity. 

§  50.  Power  of  commissions  to  order  repairs  or 
changes.  If  in  the  judgment  of  the  commission  hav- 
ing jurisdiction,  additional  tracks,  switches,  terminals 
or  terminal  facilities,  stations,  motive  power,  or  any 
other  property,  construction,  apparatus,  equipment, 
facilities  or  device  for  use  by  any  common  carrier, 
railroad  corporation  or  street  railroad  corporation  in 
or  in  connection  with  the  transportation  of  passengers 
or  property  ought  reasonably  to  be  provided,  or  any 
repairs  or  improvements  to  or  changes  in  any  thereof 
in  use  ought  reasonably  to  be  made,  or  any  additions 
or  changes  in  construction  should  reasonably  be  made 
thereto  in  order  to  promote  the  security  or  conveni- 
ence of  the  public  or  employees,  or  in  order  to  secure 
adequate  service  or  facilities  for  the  transportation 
of  passengers  or  property,  the  commission  shall,  after 
a  hearing  either  on  its  own  motion  or  after  complaint, 
make  and  serve  an  order  directing  such  repairs,  im- 
provements, changes  or  additions  to  be  made  within 
a  reasonable  time  and  in  a  manner  to  be  specified 
therein,  and  every  common  carrier,  railroad  corpora- 
tion and  street  railroad  corporation  is  hereby  required 
and     directed     to     make     all     repairs,     improvements, 


NEW   YORK  LAW.  735 

changes  and  additions  required  of  it  by  any  order 
of  the  commission  served  upon  it.  If  any  repairs, 
improvements,  changes  or  additions  which  the  com- 
mission has  determined  to  order  require  joint  action 
by  two  or  more  of  said  corporations,  the  commission 
shall,  before  entry  and  service  of  order,  notify  the 
said  corporations  that  such  repairs,  improvements, 
changes  or  additions  will  be  required  and  that  the 
same  shall  be  made  at  their  joint  cost,  and  thereupon 
the  said  corporations  shall  have  thirty  days  or  such 
longer  time  as  the  commission  may  grant  within  which 
to  agree  upon  the  part  or  division  of  cost  of  such 
repairs,  improvements,  changes  or  additions  which 
each  shall  bear.  If  at  the  expiration  of  such  time  such 
corporations  shall  fail  to  file  with  the  commission  a 
statement  that  an  agreement  has  been  made  for  a 
division  or  apportionment  of  such  repairs,  improve- 
ments, changes  or  additions  the  commission  shall  have 
authority,  after  further  hearing,  to  fix  in  its  order  the 
proportion  of  such  cost  or  expense  to  be  borne  by 
each  corporation  and  the  manner  in  which  the  same 
shall  be  paid  and  secured.  But  this  section  shall  not 
be  construed  to  authorize  the  commission  to  require 
two  or  more  railroad  corporations  to  unite  in  the 
erection  of  a  union  station. 

§  51  Power  of  commissions  to  order  changes  in 
time  schedules;  running  of  additional  cars  and  trains. 
If,  in  the  judgment  of  the  commission  having  juris- 
diction, any  railroad  corporation  or  street  railroad 
corporation  does  not  run  trains  enough  or  cars  enough 
or  possess  or  operate  motive  power  enough,  reason- 
ably to  accommodate  the  traffic,  passenger  and  freight, 
transported  by  or  offered  for  transportation  to  it,  or 
does  not  run  its  trains  or  cars  with  sufficient  fre- 
quency or  at  reasonable  or  proper  time  having  regard 


736  PUBLIC   UTILITIES. 

to  safety,  or  does  not  run  any  train  or  trains,  car  or 
cars,  upon  a  reasonable  time  schedule  for  the  run,  the 
commission  shall,  after  a  hearing  either  on  its  own 
motion  or  after  complaint,  have  power  to  make  an 
order  directing  any  such  railroad  corporation  or  street 
railroad  corporation  to  increase  the  number  of  its 
trains  or  of  its  cars  or  its  motive  power  or  to  change 
the  time  for  starting  its  trains  or  cars  or  to  change 
the  time  schedule  for  the  run  of  any  train  or  car  or 
make  any  other  suitable  order  that  the  commission 
may  determine  reasonably  necessary  to  accommodate 
and  transport  the  traffic,  passenger  or  freight,  trans- 
ported or  offered  for  transportation. 

§  52.  Uniform  system  of  accounts;  access  to  ac- 
counts, et  cetera;  forfeitures.  Each  commission  may, 
whenever  it  deems  advisable,  establish  a  system  of 
accounts  to  be  used  by  railroad  and  street  railroad  cor- 
porations or  other  common  carriers  which  are  subject 
to  its  supervision,  or  may  classify  the  said  corporations 
and  other  carriers  and  prescribe  a  system  of  accounts 
for  each  class,  and  may  prescribe  the  manner  in  which 
such  accounts  shall  be  kept.  It  may  also  in  its  dis- 
cretion prescribe  the  forms  of  accounts,  records  and 
memoranda  to  be  kept  by  such  corporations,  including 
the  accounts,  records  and  memoranda  of  the  move- 
ment of  traf^c  as  well  as  the  receipts  and  expenditures 
of  moneys.  Notice  of  alterations  by  the  commission 
in  the  required  method  or  form  of  keeping  a  system 
of  accounts  shall  be  given  to  such  persons  or  corpora- 
tions by  the  commission  at  least  six  months  before 
the  same  are  to  take  effect.  The  system  of  accounts 
established  by  the  commission  and  the  forms  of  ac- 
counts, records  and  memoranda  prescribed  by  it  as 
provided  above  shall  conform  in  the  case  of  railroad 
corporations  as  nearly  as  may  be  to  those  from  time 


NEW   YORK  LAW.  737 

to  time  established  and  prescribed  by  the  interstate 
commerce  commission  under  the  provisions  of  the  act 
of  congress  entitled  "An  act  to  regulate  commerce" 
approved  February  fourth,  eighteen  hundred  and 
eighty-seven,  and  the  acts  amendatory  thereof  or  sup- 
plementary thereto.  The  commission  shall  at  all  times 
have  access  to  all  accounts,  records  and  memoranda 
kept  by  railroad  and  street  railroad  corporations  and 
by  common  carriers,  and  may  designate  any  of  its 
officers  or  employees  who  shall  thereupon  have  au- 
thority under  the  order  of  the  commission  to  inspect 
and  examine  any  and  all  accounts,  records  and  memo- 
randa kept  by  such  corporations.  The  commission 
may,  after  hearing,  prescribe  by  order  the  accounts  in 
which  particular  outlays  and  receipts  shall  be  entered, 
charged  or  credited.  Where  the  commission  has  pre- 
scribed the  forms  of  accounts,  records  and  memoranda 
to  be  kept  by  such  corporations  it  shall  be  unlawful  for 
them  to  keep  any  other  accounts,  records  or  memo- 
randa than  those  so  prescribed,  or  those  prescribed 
by  or  under  authority  of  the  United  States.  Any 
employee  or  agent  of  the  commission  who  divulges 
any  fact  or  information  which  may  come  to  his  knowl- 
edge during  the  course  of  any  such  inspection  or  ex- 
amination except  in  so  far  as  he  may  be  directed  by 
the  commission,  or  by  a  court  or  judge  thereof,  or  au- 
thorized by  law,  shall  be  guilty  of  a  misdemeanor. 

§  53.  Franchises  and  privileges.  Without  first 
having  obtained  the  permission  and  approval  of  the 
proper  commission  no  railroad  corporation,  street  rail- 
road corporation  or  common  carrier  shall  begin  the 
construction  of  a  railroad  or  street  railroad,  or  any 
extension  thereof,  for  which  prior  to  the  time  when 
this  act  becomes  a  law  a  certificate  of  public  con- 
venience and  necessity  shall  not  have  been  granted  by 

47— Pub.  Ut. 


738  PUBLIC   UTILITIES. 

the  board  of  railroad  commissioners  or  where  prior 
to  said  time  said  corporation  or  common  carrier  shall 
not  have  become  entitled  by  virtue  of  its  compliance 
with  the  provisions  of  the  railroad  law  to  begin  such 
construction;  nor,  except  as  above  provided  in  this 
section,  shall  any  such  corporation  or  common  carrier 
exercise  any  franchise  or  right  under  any  provision 
of  the  railroad  law,  or  of  any  other  law,  not  heretofore 
lawfully  exercised,  without  first  having  obtained  the 
permission  and  approval  of  the  proper  commission. 
The  commission  within  whose  district  such  construc- 
tion is  to  be  made,  or  within  whose  district  such  fran- 
chise or  right  is  to  be  exercised,  shall  have  power  to 
grant  the  permission  and  approval  herein  specified 
whenever  it  shall  after  due  hearing  determine  that 
such  construction  or  such  exercise  of  the  franchise  or 
privilege  is  necessary  or  convenient  for  the  public 
service.  And  if  such  construction  is  to  be  made,  or 
such  franchise  to  be  exercised  in  both  districts,  the 
approval  of  both  commissions  shall  be  secured. 

§  54.  Transfer  of  franchises  or  stocks,  i.  No 
franchise  nor  any  right  to  or  under  any  franchise,  to 
own  or  operate  a  railroad  or  street  railroad  shall  be 
assigned,  transferred  or  leased,  nor  shall  any  contract  1 

or  agreement  with  reference  to  or  affecting  any  such 
franchise  or  right  be  valid  or  of  any  force  or  effect 
whatsoever,  unless  the  assignment,  transfer,  lease, 
contract  or  agreement  shall  have  been  approved  by 
the  proper  commission.  The  permission  and  approval 
of  the  commission,  to  the  exercise  of  a  franchise  under 
section  fifty-three,  or  to  the  assignment,  transfer  or 
lease  of  a  franchise  under  this  section  shall  not  be  con- 
strued to  revive  or  validate  any  lapsed  or  invalid  fran- 
chise, or  to  enlarge  or  add  to  the  powers  and  privileges 


NEW   YORK  LAW.  739 

contained  in   the   grant   of   any  franchise,   or  to  waive 
any  forfeiture. 

2.  No  railroad  corporation,  street  railroad  cor- 
poration, or  electrical  corporation,  domestic  or  foreign, 
shall  hereafter  purchase  or  acquire,  take  or  hold,  any 
part  of  the  capital  stock  of  any  railroad  corporation 
or  street  railroad  corporation  or  other  common  car- 
rier organized  or  existing  under  or  by  virtue  of  the 
laws  of  this  state,  unless  authorized  so  to  do  by  the 
commission  empowered  by  this  act  to  give  such  con- 
sent; and  save  where  stock  shall  be  transferred  or 
held  for  the  purpose  of  collateral  security  only  with 
the  consent  of  the  commission  empowered  by  this 
chapter  to  give  such  consent,  no  stock  corporation  of 
any  description,  domestic  or  foreign,  other  than  a  rail- 
road corporation,  street  railroad  corporation,  or  elec- 
trical corporation,  shall  purchase  or  acquire,  take,  or 
hold,  more  than  ten  per  centum  of  the  total  capital 
stock  issued  by  any  railroad  corporation  or  street 
railroad  corporation  or  other  common  carrier  organ- 
ized or  existing  under  or  by  virtue  of  the  laws  of  this 
state,  except  that  a  corporation  now  lawfully  holding 
a  majority  of  the  capital  stock  of  any  railroad  corpora- 
tion or  street  railroad  corporation  may  with  the  con- 
sent of  the  commission  acquire  and  hold  the  remainder 
of  the  capital  stock  of  such  railroad  corporation  or 
street  railroad  corporation  or  any  portion  thereof. 
Nothing  herein  contained  shall  be  construed  to  pre- 
vent the  holding  of  stock  heretofore  lawfully  acquired, 
or  to  prevent,  upon  the  surrender  or  exchange  of  said 
stock  pursuant  to  a  reorganization  plan,  the  purchase, 
acquisition,  taking  or  holding  of  a  proportionate 
amount  of  stock  of  any  new  corporation  organized  to 
take  over,  at  foreclosure  or  other  sale,  the  property  of 
any  corporation  whose  stock  has  been  thus  surrend- 
ered or  exchanged.     Every  contract,  assignment,  trans- 


740  PUBLIC   UTILITIES. 

fer  or  agreement  for  transfer  of  any  stock  by  or 
through  any  person  or  corporation  to  any  corporation, 
in  violation  of  any  provision  of  this  chapter,  shall  be 
void  and  of  no  effect,  and  no  such  transfer  or  assign- 
ment shall  be  made  upon  the  books  of  any  such  rail- 
road corporation  or  street  railroad  corporation,  or 
shall  be  recognized  as  effective  for  any  purpose.  The 
power  conferred  by  this  section  to  approve  or  disap- 
prove a  transaction  relating  to  franchises,  rights  or 
stock  of  any  railroad  corporation  or  street  railroad 
corporation,  or  other  common  carrier,  shall  be  exer- 
cised by  the  commission  which  is  authorized  by  this 
chapter  to  approve  the  issue  of  stock  by  such  railroad 
corporation  or  street  railroad  corporation. 

§  55-  Approval  of  issues  of  stock,  bonds  and  other 
forms  of  indebtedness.  A  common  carrier,  railroad 
corporation  or  street  railroad  corporation  organized 
or  existing,  or  hereafter  incorporated,  under  or  by 
virtue  of  the  laws  of  the  state  of  New  York,  may  issue 
stocks,  bonds,  notes  or  other  evidence  of  indebtedness 
payable  at  periods  of  more  than  twelve  months  after 
the  date  thereof,  when  necessary  for  the  acquisition 
of  property,  the  construction,  completion,  extension  or 
improvement  of  its  facilities,  or  for  the  improvement 
or  maintenance  of  its  service  or  for  the  discharge  or 
lawful  refunding  of  its  obligations  or  for  the  reim- 
bursement of  moneys  actually  expended  from  income, 
or  from  any  other  moneys  in  the  treasury  of  the  cor- 
poration not  secured  by  or  obtained  from  the  issue  of 
stocks,  bonds,  notes  or  other  evidence  of  indebtedness 
of  such  corporation,  within  five  years  next  prior  to  the 
filing  of  an  application  with  the  proper  commission 
for  the  required  authorization,  for  any  of  the  aforesaid 

[Thus  amended  by  ch.  788,  L.  1911.] 


NEW  YORK  LAW.  74I 

purposes  except  maintenance  of  service  and  except 
replacements  in  cases  where  the  appHcant  shall  have 
kept  its  accounts  and  vouchers  of  such  expenditure  in 
such  manner  as  to  enable  the  commission  to  ascertain 
the  amount  of  moneys  so  expended  and  the  purposes 
for  which  such  expenditure  was  made,  provided  and 
not  otherwise  that  there  shall  have  been  secured 
from  the  proper  commission  an  order  authorizing  sucli 
issue,  and  the  amount  thereof  and  stating  the  purposes 
to  which  the  issue  or  proceeds  thereof  are  to  be  ap- 
plied, and  that,  in  the  opinion  of  the  commission,  the 
money,  property  or  labor  to  be  procured  or  paid  for  by 
the  issue  of  such  stock,  bonds,  notes  or  other  evidence 
of  indebtedness  is  or  has  been  reasonably  required  for 
the  purposes  specified  in  the  order,  and  that  except  as 
otherwise  permitted  in  the  order  in  the  case  of  bonds, 
notes,  and  other  evidence  of  indebtedness,  such  pur- 
poses are  not,  in  whole  or  in  part,  reasonably  charge- 
able to  operating  expenses  or  to  income;  but  this  pro- 
vision shall  not  apply  to  any  lawful  issue  of  stock,  to 
the  lawful  execution  and  delivery  of  any  mortgage  or 
to  the  lawful  issue  of  bonds  thereunder,  which  shall 
have  been  duly  approved  by  the  board  of  railroad  com- 
missioners before  July  first,  nineteen  hundred  and 
seven.  Nothing  herein  contained  shall  prohibit  the 
commission  from  giving  its  consent  to  the  issue  of 
bonds,  notes  or  other  evidence  of  indebtedness  for  the 
reimbursement  of  moneys  heretofore  actually  expended 
from  income  for  any  of  the  aforesaid  purposes,  except 
maintenance  of  service  and  replacements,  prior  to  five 
years  next  preceding  the  filing  of  an  application  there- 
for, if  in  the  judgment  of  the  commission  such  consent 
should  be  granted;  provided  application  for  such  con- 
sent shall  be  made  prior  to  January  first,  nineteen  hun- 
dred and  twelve.  For  the  purpose  of  enabling  it  to 
determine  whether  it   should  issue  such  an  order,   the 


742  PUBLIC   UTILITIES. 

commission  shall  make  such  inquiry  or  investigation^ 
hold  such  hearings  and  examine  such  witnesses,  books, 
papers,  documents  or  contracts  as  it  may  deem  of 
importance  in  enabling  it  to  reach  a  determination. 
Such  corporation  shall  not  without  the  consent  of  the 
commission  apply  said  issue  or  any  proceeds  thereof 
to  any  purpose  not  specified  in  such  order.  Such 
common  carrier,  railroad  corporation  or  street  railroad 
corporation  may  issue  notes,  for  proper  corporate 
purposes  and  not  in  violation  of  any  provision  of  this 
chapter  or  any  other  act,  payable  at  periods  of  not 
more  than  twelve  months  without  such  consent,  but 
no  such  notes  shall,  in  whole  or  in  part,  directly  or 
indirectly  be  refunded,  by  any  issue  of  stock  or  bonds 
or  by  any  evidence  of  indebtedness  running  for  more  m 

than  twelve  months  without  the  consent  of  the  proper  * 

commission.  Provided,  however,  that  the  commission 
shall  have  no  power  to  authorize  the  capitalization  of 
any  franchise  to  be  a  corporation  or  to  authorize  the 
capitalization  of  any  franchise  or  the  right  to  own, 
operate  or  enjoy  any  franchise  whatsoever  in  excess 
of  the  amount  (exclusive  of  any  tax  or  annual  charge) 
actually  paid  to  the  state  or  to  a  political  subdivision 
thereof  as  the  consideration  for  the  grant  of  such  fran- 
chise or  right;  nor  shall  the  capital  stock  of  a  corpora- 
tion formed  by  the  merger  or  consolidation  of  two  or 
more  other  corporations,  exceed  the  sum  of  the  capital 
stock  of  the  corporations  so  consolidated,  at  the  par 
value  thereof,  or  such  sum  and  any  additional  sum 
actually  paid  in  cash;  nor  shall  any  contract  for  con- 
solidation or  lease  be  capitalized  in  the  stock  of  any 
corporation  whatever;  nor  shall  any  corporation  here- 
after issue  any  bonds  against  or  as  a  lien  upon  any 
contract  for  consolidation  or  merger.  Whenever  it 
shall  happen  that  any  railroad  corporation  shall  own 
or  operate  its  lines  in  both  districts  it  shall,  under  this 


NEW   YORK  LAW.  743 

section,  apply  to  the  commission  of  the  second  district. 
Whenever  it  shall  happen  that  any  street  railroad  cor- 
poration shall  own  or  operate  its  lines  in  both  dis- 
tricts, it  shall,  under  this  section,  apply  to  the  com- 
mission of  the  first  district.  Any  other  common  car- 
rier not  operating  exclusively  in  the  first  district  shall 
apply  to  the  commission  of  the  second  district. 

§  55-a.  Reorganizations,  i.  Reorganizations  of 
railroad  corporations,  street  railroad  corporations  and 
common  carriers  pursuant  to  sections  nine  and  ten  of 
the  stock  corporation  law  and  such  other  laws  as  may 
be  enacted  from  time  to  time  shall  be  subject  to  the 
supervision  and  control  of  the  proper  commission  and 
no  such  reorganization  shall  be  had  without  the  au- 
thorization of  such  commission. 

2.  Upon  all  such  reorganizations  the  amount  of 
capitalization,  including  therein  all  stocks  and  bonds 
and  other  evidence  of  indebtedness,  shall  be  such  as 
is  authorized  by  the  commission  which,  in  making  its 
determination,  shall  not  exceed  the  fair  value  of  the 
property  involved,  taking  into  consideration  its  original 
cost  of  construction,  duplication  cost,  present  condition, 
earning  power  at  reasonable  rates  and  all  other  rele- 
vant matters  and  any  additional  sum  or  sums  as  shall 
be  actually  paid  in  cash,  provided,  however,  that  the 
commission  may  make  due  allowance  for  discount  of 
bonds.  Any  reorganization  agreement  before  it  be- 
comes effective  shall  be  amended  so  that  the  amount 
of  capitalization  shall  conform  to  the  amount  author- 
ized by  the  commission. 

§56.  Forfeiture;  penalties,  i.  Every  common 
carrier,    railroad    corporation    and    street    railroad    cor- 

[Added  by  ch.  289,  L.  1912.] 


744  PUBLIC   UTILITIES. 

poration  and  all  officers,  and  agents  of  any  common 
carrier,  railroad  corporation  or  street  railroad  corpora- 
tion shall  obey,  observe  and  comply  with  every  order 
made  by  the  commission,  under  authority  of  this  chap- 
ter so  long  as  the  same  shall  be  and  remain  in  force. 
Any  common  carrier,  railroad  corporation  or  street 
railroad  corporation  which  shall  violate  any  provision 
of  this  chapter,  or  which  fails,  omits  or  neglects  to 
obey,  observe  or  comply  with  any  order  or  any  direc- 
tion or  requirement  of  the  commission,  shall  forfeit 
to  the  people  of  the  state  of  New  York  not  to  exceed 
the  sum  of  five  thousand  dollars  for  each  and  every 
offense;  every  violation  of  any  such  order  or  direction 
or  requirement,  or  of  this  chapter,  shall  be  a  separate 
and  distinct  offense,  and,  in  case  of  a  continuing  vio- 
lation, every  day's  continuance  thereof  shall  be  and  be 
deemed  to  be  a  separate  and  distinct  offense. 

2.  Every  officer  and  agent  of  any  such  common 
carrier  or  corporation  who  shall  violate,  or  who  pro- 
cures, aids  or  abets  any  violation  by  any  such  common 
carrier  or  corporation  of,  any  provision  of  this  chapter, 
or  who  shall  fail  to  obey,  observe  and  comply  with 
any  order  of  the  commission  or  any  provision  of  an 
order  of  the  commission,  or  who  procures,  aids  or 
abets  any  such  common  carrier  or  corporation  in  its 
failure  to  obey,  observe  and  comply  with  any  such  or- 
der or  provision,  shall  be  guilty  of  a  misdemeanor. 

§  57.  Summary  proceedings.  Whenever  either 
commission  shall  be  of  opinion  that  a  common  carrier, 
railroad  corporation  or  street  railroad  corporation  sub- 
ject to  its  supervision  is  failing  or  omitting  or  about 
to  fail  or  omit  to  do  anything  required  of  it  by  law  or 
by  order  of  the  commission,  or  is  doing  anything  or 
about  to  do  anything  or  permitting  anything  or  about 
to  permit  anything  to  be  done,  contrary  to  or  in  vio- 


I 


NEW  YORK  LAW.  745 

lation  of  law  or  of  any  order  of  the  commission,  it 
shall  direct  counsel  to  the  commission  to  commence  an 
action  or  proceeding  in  the  supreme  court  of  the  state 
of  New  York  in  the  name  of  the  commission  for  the 
purpose  of  having  such  violation  or  threatened  viola- 
tions stopped  and  prevented  either  by  mandamus  or 
injunctions.  Counsel  to  the  commission  shall  there- 
upon begin  such  action  or  proceeding  by  a  petition  to 
the  supreme  court  alleging  the  violation  complained 
of  and  praying  for  appropriate  relief  by  way  of  man- 
damus or  injunction.  It  shall  thereupon  be  the  duty 
of  the  court  to  specify  the  time,  not  exceeding  twenty 
days  after  service  of  a  copy  of  the  petition,  within 
which  the  common  carrier,  railroad  corporation  or 
street  railroad  corporation  complained  of  must  answer 
the  petition.  In  case  of  default  in  answer  or  after 
answer,  the  court  shall  immediately  inquire  into  the 
facts  and  circumstances  in  such  manner  as  the  court 
shall  direct  without  other  or  formal  pleadings,  and 
without  respect  to  any  technical  requirement.  Such 
other  persons  or  corporations  as  the  court  shall  deem 
necessary  or  proper  to  join  as  parties  in  order  to  make 
its  order,  judgment  or  writs  effective,  may  be  joined  as 
parties  upon  application  of  counsel  to  the  commission. 
The  final  judgment  in  any  such  action  or  proceeding 
shall  either  dismiss  the  action  or  proceeding  or  direct 
that  a  wrU  of  mandamus  or  an  injunction  or  both 
issue  as  prayed  for  in  the  petition  or  in  such  modified 
or  other  form  as  the  court  may  determine  will  afford 
appropriate  relief. 

§  58.  Penalties  for  other  than  common  carriers. 
I.  Any  corporation,  other  than  a  common  carrier, 
railroad  corporation  or  street  railroad  corporation, 
which  shall  violate  any  provision  of  this  chapter,  or 
shall    fail    to    obey,    observe    and    comply    with    every 


746  PUBLIC   UTILITIES. 

order  made  by  the  commission  under  authority  of  this 
chapter  so  long  as  the  same  shall  be  and  remain  in 
force,  shall  forfeit  to  the  people  of  the  state  of  New 
York  a  sum  not  exceeding  one  thousand  dollars  for 
each  and  every  offense;  every  such  violation  shall  be 
a  separate  and  distinct  offense,  and  the  penalty  or 
forfeiture  thereof  shall  be  recovered  in  an  action  as 
provided  in  section  twenty-four  of  this  chapter. 

2.  Every  person  who,  either  individually  or  acting 
as  an  officer  or  agent  of  a  corporation  other  than  a 
common  carrier,  railroad  corporation  or  street  rail- 
road corporation,  shall  violate  any  provision  of  this 
chapter,  or  fail  to  obey,  observe  or  comply  with  any 
order  made  by  the  commission  under  this  chapter 
so  long  as  the  same  shall  be  or  remain  in  force,  or  who 
shall  procure,  aid  or  abet  any  such  corporation  in  its 
violation  of  this  chapter,  or  in  its  failure  to  obey,  ob- 
serve or  comply  with  any  such  order,  shall  be  guilty 
of  a  misdemeanor. 

3.  In  construing  and  enforcing  the  provisions  of 
this  chapter  relating  to  forfeitures  and  penalties  the 
act  of  any  director,  officer  or  other  person  acting  for 
or  employed  by  any  common  carrier,  railroad  corpo- 
ration, street  railroad  corporation  or  corporation,  act- 
ing within  the  scope  of  his  official  duties  or  employ- 
ment, shall  be  in  every  case  and  be  deemed  to  be  the 
act  of  such  common  carrier,  railroad  corporation,  street 
railroad  corporation  or  corporation. 

§  59.  Duties  of  commissions  as  to  interstate  traf- 
fic. Either  commission  may  investigate  interstate 
freight  or  passenger  rates  or  interstate  freight  or  pas- 
senger service  on  railroads  within  the  state,  and  when 
such  rates  are,  in  the  opinion  of  either  commission, 
excessive  or  discriminatory  or  are  levied  or  laid  in 
violation   of   the   act   of   congress   entitled   "An    act   to 


NEW  YORK  LAW.  747 

regulate  commerce,"  approved  February  fourth,  eigh- 
teen hundred  and  eighty-seven,  and  the  acts  amenda- 
tory thereof  and  supplementary  thereto,  or  in  con- 
flict with  the  rulings,  orders  or  regulations  of  the  in- 
terstate commerce  commission,  the  commission  may 
apply  by  petition  to  the  interstate  commerce  commis- 
sion for  relief  or  may  present  to  the  interstate  com- 
merce commission  all  facts  coming  to  its  knowledge, 
as  to  violations  of  the  rulings,  orders,  or  regulations 
of  that  commission  or  as  to  violations  of  the  said  act 
to  regulate  commerce  or  acts  amendatory  thereof  or 
supplementary  thereto. 


748  PUBLIC   UTILITIES. 


ARTICLE  IV. 

Provisions  Relating  to  Gas  Corporations  and  Electri- 
cal Corporations;  Regulation  of  Price  of  Gas  and 
Electricity. 

Section  64.  Application  of  article. 

65.  Safe  and  adequate  service;  just  and  reasonable  charges; 

unjust  discrimination;   unreasonable  preference. 

66.  General  powers  of  commissions  in  respect  to  gas  and 

electricity. 

67.  Inspection  of  gas  and  electric  meters. 

68.  Approval  of  incorporation  and  franchises;  certificate. 

69.  Approval   of  issue  of  stock,  bonds  and  other  forms  of 

indebtedness. 
69-a.  Reorganizations. 

70.  Approval  of  transfer  of  franchise. 

71.  Complaints  as  to  quality  and  price  of  gas  and  electricity; 

investigation  by  commission;  forms  of  complaints. 

72.  Notice  and  hearing;    order  fixing  price  of  gas  or  elec- 

tricity, or  requiring  improvements. 

73.  Forfeiture  for  noncompliance  with  order. 

74.  Summary  proceedings. 

75.  Defense  in  case  of  excessive  charge  for  gas  or  electricity. 

76.  Jurisdiction. 

77.  Powers  of  local  oflBcers. 

§  64.  Application  of  article.  This  article  shall  ap- 
ply to  the  manufacture  and  furnishing  of  gas  for  light, 
heat  or  power  and  the  furnishing  of  natural  gas  for 
light,  heat  or  power,  and  the  generation,  furnishing 
and  transmission  of  electricity  for  light,  heat  or  power. 

§65.  Safe  and  adequate  service;  just  and  reason- 
able charges;  unjust  discrimination;  unreasonable  pref- 
ence.  i.  Every  gas  corporation,  every  electrical  cor- 
poration and  every  municipality  shall  furnish  and  pro- 
vide such  service,  instrumentalities  and  facilities  as 
shall  be  safe  and  adequate  and  in  all  respects  just  and 


NEW   YORK  LAW.  749 

reasonable.  All  charges  made  or  demanded  by  any 
such  gas  corporation,  electrical  corporation  or  mu- 
nicipality for  gas,  electricity  or  any  service  rendered 
or  to  be  rendered,  shall  be  just  and  reasonable  and  not 
more  than  allowed  by  law  or  by  order  of  the  commis- 
sion having  jurisdiction.  Every  unjust  or  unreasonable 
charge  made  or  demanded  for  gas,  electricity  or  any 
such  service,  or  in  connection  therewith,  or  in  excess 
of  that  allowed  by  law  or  by  the  order  of  the  commis- 
sion is  prohibited. 

2.  No  gas  corporation,  electrical  corporation  or  mu- 
nicipality shall  directly  or  indirectly,  by  any  special  rate, 
rebate,  drawback  or  other  device  or  method,  charge, 
demand,  collect  or  receive  from  any  person  or  corpo- 
ration a  greater  or  less  compensation  for  gas  or  elec- 
tricity or  for  any  service  rendered  or  to  be  rendered 
or  in  connection  therewith,  except  as  authorized  in  this 
chapter,  than  it  charges,  demands,  collects  or  receives 
from  any  other  person  or  corporation  for  doing  a  like 
and  contemporaneous  service  with  respect  thereto  un- 
der the  same  or  substantially  similar  circumstances  or 
conditions. 

3.  No  gas  corporation,  electrical  corporation  or 
municipality  shall  make  or  grant  any  undue  or  unrea- 
sonable preference  or  advantage  to  any  person,  cor- 
poration or  locality,  or  to  any  particular  description 
of  service  in  any  respect  whatsoever,  or  subject  any 
particular  person,  corporation  or  locality  or  any  par- 
ticular description  of  service  to  any  undue  or  unrea- 
sonable prejudice  or  disadvantage  in  any  respect  what- 
soever. 

4.  Nothing  in  this  chapter  shall  be  taken  to  pro- 
hibit a  gas  corporation  or  electrical  corporation  from 
establishing  a  sliding  scale  for  a  fixed  period  for  the 
automatic  adjustment  of  charges  for  gas,  electricity  or 
any  service  rendered  or  to  be  rendered  and  the   divi- 


750  PUBLIC  UTILITIES. 

dends  to  be  paid  to  stockholders  of  such  gas  corpora- 
tion or  electrical  corporation,  provided  that  the  shding 
scale  shall  first  have  been  filed  with  and  approved  by 
the  proper  commission;  but  nothing  in  this  subdivision 
shall  operate  to  prevent  the  commission  after  the  ex- 
piration of  such  fixed  period  from  fixing  proper,  just 
and  reasonable  rates  and  charges  to  be  made  for  ser- 
vice as  authorized  in  this  article. 

§  66.  General  powers  of  commissions  in  respect 
to  gas  and  electricity.  Each  commission  shall  within 
its  jurisdiction: 

1.  Have  general  supervision  of  all  gas  corpora- 
tions and  electrical  corporations  having  authority  un- 
der any  general  or  special  law  or  under  any  charter 
or  franchise  to  lay  down,  erect  or  maintain  wires, 
pipes,  conduits,  ducts  or  other  fixtures  in,  over  or 
under  the  streets,  highways  and  public  places  of  any 
municipality,  for  the  purpose  of  furnishing  or  dis- 
tributing gas  or  of  furnishing  or  transmitting  electri- 
city for  light,  heat  or  power,  or  maintaining  under- 
ground conduits  or  ducts  for  electrical  conductors,  and 
all  gas  plants  and  electric  plants  owned,  leased  or 
operated  by  any  gas  corporation  or  electrical  corpo- 
ration. 

2.  Investigate  and  ascertain,  from  time  to  time, 
the  quality  of  gas  supplied  by  persons,  corporations 
and  municipalities;  examine  or  investigate  the  methods 
employed  by  such  persons,  corporations  and  munici- 
palities in  manufacturing,  distributing  and  supplying 
gas  or  electricity  for  light,  heat  or  power  and  in  trans- 
mitting the  same,  and  have  power  to  order  such 
reasonable  improvements  as  will  best  promote  the 
public  interest,  preserve  the  public  health  and  protect 
those  using  such  gas  or  electricity  and  those  employed 
in  the  manufacture  and  distribution  thereof,  and  have 


NEW   YORK  LAW.  75I 

power  to  order  reasonable  improvements  and  exten- 
sions of  the  works,  wires,  poles,  lines,  conduits,  ducts 
and  other  reasonable  devices,  apparatus  and  property 
of  gas  corporations,  electrical  corporations  and  mu- 
nicipalities. 

3.  Have  power  by  order  to  fix  from  time  to  time 
standards  for  the  measurement  of  the  purity  or  illumi- 
nating power  of  gas  to  be  manufactured,  distributed  or 
sold  by  persons,  corporations  or  municipalities  for 
lighting,  heating  or  power  purposes,  and  to  prescribe 
from  time  to  time  the  efficiency  of  the  electric  supply 
system,  of  the  current  supplied  and  of  the  lamps  fur- 
nished by  the  persons,  corporations  or  municipalities 
generating  and  selling  electric  current,  and  by  order 
to  require  the  gas  so  manufactured,  distributed  or  sold 
to  equal  the  standards  so  fixed  by  it,  and  to  prescribe 
from  time  to  time  the  reasonable  minimum  and  maxi- 
mum pressure  at  which  gas  shall  be  delivered  by  said 
persons,  corporations  or  municipalities.  For  the  pur- 
pose of  determining  whether  the  gas  manufactured, 
distributed  or  sold  by  such  persons,  corporations  or 
municipalities  for  lighting,  heating  or  power  purposes 
conforms  to  the  standards  of  illuminating  power,  pur- 
ity and  pressure,  and  for  the  purpose  of  determining 
whether  the  efficiency  of  the  electric  supply  system, 
of  the  current  supplied  and  of  the  lamps  furnished 
conforms  to  the  orders  issued  by  the  commission,  the 
commission  shall  have  power,  of  its  own  motion,  to 
examine  and  investigate  the  plants  and  methods  em- 
ployed in  manufacturing,  delivering  and  supplying  gas 
or  electricity,  and  shall  have  access  through  its  mem- 
bers or  persons  employed  and  authorized  by  it  to 
make  such  examinations  and  investigations  to  all  parts 
of  the  manufacturing  plants  owned,  used  or  operated 
for  the  manufacture,  transmission  or  distribution  of 
gas  or  electricity  by  any  such   person,   corporation   or 


752  PUBLIC   UTILITIES. 

municipality.  Any  employee  or  agent  of  the  commis- 
sion who  divulges  any  fact  or  information  which  may 
come  to  his  knowledge  during  the  course  of  any  such 
inspection  or  examination,  except  in  so  far  as  he  may 
be  directed  by  the  commission,  or  by  a  court  or  judge 
thereof,  or  authorized  by  law,  shall  be  guilty  of  a 
misdemeanor. 

4.  Have  power,  in  its  discretion,  to  prescribe  uni- 
form methods  of  keeping  accounts,  records  and  books, 
to  be  observed  by  gas  corporations  and  electrical  cor- 
porations and  by  municipalities  engaged  in  the  manu- 
facture, sale  and  distribution  of  gas  and  electricity  for 
light,  heat  or  power.  It  may  also  in  its  discretion  pre- 
scribe, by  order,  forms  of  accounts,  records  and  memo- 
randa to  be  kept  by  such  persons,  corporations  and 
municipalities.  Notice  of  alterations  by  the  commis- 
sion in  the  required  method  or  form  of  keeping  a  sys- 
tem of  accounts  shall  be  given  to  such  persons  or  cor- 
porations by  the  commission  at  least  six  months  be- 
fore the  same  shall  take  effect.  Any  other  and  addi- 
tional forms  of  accounts,  records  and  memoranda  kept 
by  such  corporation  shall  be  subject  to  examination 
by   the    commission. 

5.  Examine  all  persons,  corporations  and  munici- 
palities under  its  supervision  and  keep  informed  as  to 
the  methods,  practices,  regulations  and  property  em- 
ployed by  them  in  the  transaction  of  their  business. 
Whenever  the  commission  shall  be  of  opinion,  after 
a  hearing  had  upon  its  own  motion  or  upon  complaint, 
that  the  rates  or  charges  or  the  acts  or  regulations 
of  any  such  person,  corporation  or  municipality  are 
unjust,  unreasonable,  unjustly  discriminatory  or  un- 
duly preferential  or  in  anywise  in  violation  of  any 
provision  of  law,  the  commission  shall  determine  and 
prescribe  the  just  and  reasonable  rates  and  charges 
thereafter  to  be  in  force  for  the  service  to  be  furnished 


NEW   YORK   LAW.  753 

notwithstanding  that  a  higher  rate  or  charge  has  here- 
tofore been  authorized  by  statute,  and  the  just  and  rea- 
sonable acts  and  regulations  to  be  done  and  observed; 
and  whenever  the  commission  shall  be  of  opinion, 
after  a  hearing  had  upon  its  own  motion  or  upon  com- 
plaint, that  the  property,  equipment  or  appliances  of 
any  such  person,  corporation  or  municipality  are  un- 
safe, inefficient  or  inadequate,  the  commission  shall 
determine  and  prescribe  the  safe,  efficient  and  adequate 
property,  equipment  and  appliances  thereafter  to  be 
used,  maintained  and  operated  for  the  security  and 
accommodation  of  the  public  and  in  compliance  with 
the  provisions  of  law  and  of  their  franchises  and  char- 
ters. 

6.  Require  every  person  and  corporation  under 
its  supervision  and  it  shall  be  the  duty  of  every  such 
person  and  corporation  to  file  with  the  commission  an 
annual  report,  verified  by  the  oath  of  the  president, 
treasurer,  general  manager  or  receiver,  if  any,  thereof. 
The  verification  shall  be  made  by  said  official  holding 
office  at  the  time  of  the  filing  of  said  report,  and  if 
not  made  upon  the  knowledge  of  the  person  verifying 
the  same  shall  set  forth  the  sources  of  his  information 
and  the  grounds  of  his  belief  as  to  any  matters  not 
stated  to  be  verified  upon  his  knowledge.  The  report 
shall  show  in  detail  (a)  the  amount  of  its  authorized 
capital  stock  and  the  amount  thereof  issued  and  out- 
standing; (b)  the  amount  of  its  authorized  bonded 
indebtedness  and  the  amount  of  its  bonds  and  other 
forms  of  evidence  of  indebtedness  issued  and  outstand- 
ing; (c)  its  receipts  and  expenditures  during  the  pre- 
ceding year;  (d)  the  amount  paid  as  dividends  upon 
its  stock  and  as  interest  upon  its  bonds;  (e)  the  names 
of  its  officers  and  the  aggregate  amount  paid  as  salaries 
to  them  and  the  amount  paid  as  wages  to  its  em- 
ployees; (f)  the  location  of  its  plant  or  plants  and  sys- 

48— Pub.  Ut. 


754  PUBLIC   UTILITIES. 

tern,  with  a  full  description  of  its  property  and  fran- 
chises, stating  in  detail  how  each  franchise  stated  to 
be  owned  was  acquired;  and  (g)  such  other  facts  per- 
taining to  the  operation  and  maintenance  of  the  plant 
and  system,  and  the  affairs  of  such  person  or  corpo- 
ration as  may  be  required  by  the  commission.  Such 
reports  shall  be  in  the  form,  cover  the  period  and  be 
filed  at  the  time  prescribed  by  the  commission.  The 
commission  may,  from  time  to  time,  make  changes 
and  additions  in  such  forms.  When  any  such  report 
is  defective  or  believed  to  be  erroneous,  the  commis- 
sion shall  notify  the  person,  corporation  or  municipal- 
ity making  such  report  to  amend  the  same  within  a 
time  prescribed  by  the  commission.  Any  such  person 
or  corporation  or  municipality  which  shall  neglect  to 
make  any  such  report  or  which  shall  fail  to  correct 
any  such  report  within  the  time  prescribed  by  the 
commission  shall  be  liable  to  a  penalty  of  one  hundred 
dollars  and  an  additional  penalty  of  one  hundred  dol- 
lars for  each  day  after  the  prescribed  time  for  which 
it  shall  neglect  to  file  or  correct  the  same,  to  be  sued 
for  in  the  name  of  the  people  of  the  state  of  New 
York.  The  amount  recovered  in  any  such  action  shall 
be  paid  into  the  state  treasury  and  be  credited  to  the 
general  fund.  The  commission  may  extend  the  time 
prescribed  for  cause  shown. 

7.  Require  each  municipality  engaged  in  operat- 
ing any  works  or  systems  for  the  manufacture  and 
supplying  of  gas  or  electricity  to  make  an  annual  re- 
port to  the  commission,  verified  by  the  oath  of  the 
general  manager  or  superintendent  thereof,  showing 
in  detail,  (a)  the  amount  of  its  authorized  bonded 
indebtedness  and  the  amount  of  its  bonds  and  other 
forms  of  evidence  of  indebtedness  issued  and  out- 
standing for  lighting  purposes;  (b)  its  receipts  and  ex- 
penditures during  the  preceding  year;   (c)  the  amount 


NEW   YORK  LAW.  755 

paid  as  interest  upon  its  bonds  and  upon  other  forms 
of  evidence  of  indebtedness;  (d)  the  name  of  and  the 
amount  paid  to  each  person  receiving  a  yearly  or 
monthly  salary,  and  the  amount  paid  as  wages  to  em- 
ployees; (e)  the  location  of  its  plant  and  system  with 
a  full  description  of  the  property;  and  (f)  such  other 
facts  pertaining  to  the  operation  and  maintenance  of 
the  plant  and  system  as  may  be  required  by  the  com- 
mission. Such  report  shall  be  in  the  form,  cover  the 
period  and  be  filed  at  the  time  prescribed  by  the  com- 
mission. 

8.  Have  power,  either  through  its  members  or 
inspectors  or  employees  duly  authorized  by  it,  to  enter 
in  or  upon  and  to  inspect  the  property,  buildings, 
plants,  factories,  power  houses,  ducts,  conduits  and 
offices  of  any  of  such  corporations,  persons  or  munici- 
palities. 

9.  Have  power  to  examine  the  accounts,  books, 
contracts,  records,  documents  and  papers  of  any  such 
corporation,  person  or  municipality,  and  have  power, 
after  hearing,  to  prescribe  by  order  the  accounts  in 
which  particular  outlays  and  receipts  shall  be  entered, 
charged  or  credited. 

10.  Have  power  to  compel,  by  subpoena  duces 
tecum,  the  production  of  any  accounts,  books,  con- 
tracts, records,  documents,  memoranda  and  papers.  In 
lieu  of  requiring  production  of  originals  by  subpoena 
duces  tecum  the  commission  or  any  commissioner  may 
require  sworn  copies  of  any  such  books,  records,  con- 
tracts, documents  and  papers,  or  parts  thereof,  to  be 
filed  with  it.  The  commission  may  require  of  all  such 
corporations,  persons  or  municipalities,  specific  an- 
swers to  questions  upon  which  the  commission  may 
need  information,  and  may  also  require  such  corpora- 
tions, persons  or  municipalities  to  file  periodic  reports 
in  the  form,  covering  the  period  and  filed  at  the  time 


756  PUBLIC   UTILITIES. 

prescribed  by  the  commission.  If  such  corporation, 
person  or  municipahty  shall  fail  to  make  specific  an- 
swer to  any  question  or  shall  fail  to  make  a  periodic 
report  when  required  by  the  commission  as  herein  pro- 
vided within  the  time  and  in  the  form  prescribed  by 
the  commission  for  the  making  and  filing  of  any  such 
report  or  answer,  such  corporation,  person  or  the  of- 
ficer of  the  municipality  shall  forfeit  to  the  state  the 
sum  of  one  hundred  dollars  for  each  and  every  day 
it  shall  continue  to  be  in  default  with  respect  to  such 
report  or  answer.  Such  forfeiture  shall  be  recovered 
in  an  action  brought  by  the  commission  in  the  name 
of  the  people  of  the  state  of  New  York.  The  amount 
recovered  in  any  such  action  shall  be  paid  into  the 
state  treasury  and  be  credited  to  the  general  fund. 

11.  Have  power  in  all  parts  of  the  state,  either  as 
a  commission  or  through  its  members,  to  subpoena 
witnesses,  take  testimony  and  administer  oaths  to 
witnesses  in  any  proceeding  or  examination  instituted 
before  it,  or  conducted  by  it  in  reference  to  any  matter 
within  its  jurisdiction  under  this  article. 

12.  Have  power  to  require  every  gas  corporation, 
electrical  corporation  and  municipality  to  file  with  the 
commission  and  to  print  and  keep  open  to  public 
inspection  schedules  showing  all  rates  and  charges 
made,  established  or  enforced  or  to  be  charged  or  en- 
forced, all  forms  of  contract  or  agreement  and  all 
rules  and  regulations  relating  to  rates,  charges  or 
service  used  or  to  be  used,  and  all  general  privileges 
and  facilities  granted  or  allowed  by  such  gas  corpora- 
tion, electrical  corporation  or  municipality;  but  this 
subdivision  shall  not  apply  to  state,  municipal  or  fed- 
eral contracts.  Unless  the  commission  otherwise  or- 
ders, no  change  shall  be  made  in  any  rate  or  charge, 
or  in  any  form  of  contract  or  agreement  or  any  rule  or 
regulation  relating  to  any  rate,  charge  or  service,   or 


NEW  YORK  LAW. 


757 


in  any  general  privilege  or  facility,  which  shall  have 
been  filed  and  published  by  a  gas  corporation,  an  elec- 
trical corporation  or  municipality  in  compliance  with 
an  order  of  the  commission,  except  after  thirty  days' 
notice  to  the  commission  and  publication  for  thirty 
days  as  required  by  order  of  the  commission,  which 
shall  plainly  state  the  changes  proposed  to  be  made 
in  the  schedule  then  in  force  and  the  time  when  the 
change  will  go  into  effect.  The  commission  for  good 
cause  shown  may  allow  changes  without  requiring 
the  thirty  days'  notice  under  such  conditions  as  it  may 
prescribe.  No  corporation  or  municipality  shall  charge, 
demand,  collect  or  receive  a  greater  or  less  or  different 
compensation  for  any  service  rendered  or  to  be  ren- 
dered than  the  rates  and  charges  applicable  to  such 
services  as  specified  in  its  schedule  filed  and  in  effect 
at  the  time;  nor  shall  any  corporation  or  municipality 
refund  or  remit  in  any  manner  or  by  any  device  any 
portion  of  the  rates  or  charges  so  specified,  nor  to 
extend  to  any  person  or  corporation  any  form  of  con- 
tract or  agreement,  or  any  rule  or  regulation,  or  any 
privilege  or  facility,  except  such  as  are  regularly  and 
uniformly  extended  to  all  persons  and  corporations 
under  like  circumstances.  The  commission  shall  have 
power  to  prescribe  the  form  of  every  such  schedule, 
and  from  time  to  time  prescribe  by  order  such  changes 
in  the  form  thereof  as  may  be  deemed  wise.  The  com- 
mission shall  also  have  power  to  establish  such  rules 
and  regulations  to  carry  into  effect  the  provisions 
of  this  subdivision  as  it  may  deem  necessary,  and  to 
modify  or  amend  such  rules  or  regulations  frorii  time 
to  time. 

13.  In  case  any  electrical  corporation  or  gas  cor- 
poration is  engaged  in  carrying  on  any  business  other 
than  owning,  operating  or  managing  a  gas  plant  or  an 
electric   plant,   which   other  business   is   not   otherwise 


758  PUBLIC   UTILITIES. 

subject  to  the  jurisdiction  of  the  commission,  and  is 
so  conducted  that  its  operations  are  to  be  substantially 
kept  separate  and  apart  from  the  owning,  operating, 
managing  or  controlling  of  such  gas  plant  or  electric 
plant,  said  corporation  in  respect  of  such  other  busi- 
ness shall  not  be  subject  to  any  of  the  provisions  of 
this  chapter  and  shall  not  be  required  to  procure  the 
assent  or  authorization  of  the  commission  to  any  act 
in  such  other  business  or  to  make  any  report  in  respect 
thereof.  But  this  subdivision  shall  not  restrict  or  Hmit 
the  powers  of  the  commission  in  respect  to  the  owning, 
operating,  managing  or  controlling  by  such  corpora- 
tion of  such  gas  plant  or  electric  plant,  and  said  pow- 
ers shall  include  also  the  right  to  inquire  as  to,  and 
prescribe  the  apportionment  of,  capitalization,  earn- 
ings, debts  and  expenses  fairly  and  justly  to  be 
awarded  to  or  borne  by  the  ownership,  operation, 
management  or  control  of  such  gas  plant  or  electric 
plant  as  distinguished  from  such  other  business.  In 
any  such  case  if  the  owning,  operating,  managing  or 
controlling  of  such  gas  plant  or  electric  plant  by  any 
such  corporation  is  wholly  subsidiary  and  incidental 
to  the  other  business  carried  on  by  it  and  is  incon- 
siderable in  amount  and  not  general  in  its  character, 
the  commission  may  by  general  rules  exempt  such 
corporation  from  making  full  reports  and  from  the 
keeping  of  accounts  as  to  such  subsidiary  and  inci- 
dental business. 

§  67.  Inspection  of  gas  and  electric  meters. 
I.  Each  commission  shall  appoint  inspectors  of  gas 
meters  whose  duty  it  shall  be  when  required  by  the 
commission  to  inspect,  examine,  prove  and  ascertain 
the  accuracy  of  any  and  all  gas  meters  used  or  in- 
tended to  be  used  for  measuring  or  ascertaining  the 
quantity  of  gas  for  light,  heat  or  power  furnished  by 


NEW   YORK  LAW.  759 

any  person,  corporation  or  municipality  to  or  for  the 
use  of  any  person  or  persons  and  when  found  to  be  or 
made  to  be  correct,  the  inspector  shall  seal  all  such 
meters  and  each  of  them  with  some  suitable  device, 
which  device  shall  be  recorded  in  the  office  of  the 
secretary  of  state. 

2.  No  corporation,  person  or  municipality  shall 
furnish,  set  or  put  in  use  any  gas  meter  which  shall 
not  have  been  inspected,  proved  and  sealed  by  an  in- 
spector of  the  commission. 

3.  Each  commission  shall  appoint  inspectors  of 
electric  meters  whose  duty  it  shall  be,  when  required 
by  the  commission,  to  inspect,  examine  and  ascertain 
the  accuracy  of  any  and  all  electric  meters  used  or 
intended  to  be  used  for  measuring  and  ascertaining 
the  quantity  of  electric  current  furnished  for  light, 
heat  or  power  by  any  person,  corporation  or  munici- 
pality to  or  for  the  use  of  any  person  or  corporation, 
and  to  inspect,  examine  and  ascertain  the  accuracy  of 
all  apparatus  for  testing  and  proving  the  accuracy  of 
electric  meters,  and  when  found  to  be  or  made  to  be 
correct  the  inspector  shall  stamp  or  mark  all  such 
meters  and  apparatus  with  some  suitable  device,  which 
device  shall  be  recorded  in  the  of^ce  of  the  secretary 
of  state.  No  corporation,  person  or  municipality  shall 
furnish,  set  or  put  in  use  any  electric  meter  the  type 
of  which  shall  not  have  been  approved  by  the  com- 
mission. 

4.  Every  gas  corporation,  electrical  corporation 
and  municipality  shall  provide,  repair  and  maintain 
such  suitable  premises  and  apparatus  and  facilities 
as  may  be  required  and  approved  by  the  commission 
for  testing  and  proving  the  accuracy  of  gas  and  elec- 
tric meters  furnished  for  use  by  it.  and  by  which 
apparatus  every  meter  may  be  tested. 

5.  If  any  consumer  to  whom  a  meter  has  been  fur- 


760  PUBLIC   UTILITIES. 

nished  shall  request  the  commission  in  writing  to  in- 
spect such  meter,  the  commission  shall  have  the  same 
inspected  and  tested;  if  the  same  on  being  so  tested 
shall  be  found  to  be  more  than  four  per  centum  if  an 
electric  meter,  or  more  than  two  per  centum  if  a  gas 
meter,  defective  or  incorrect  to  the  prejudice  of  the 
consumer,  the  expense  of  such  inspection  and  test 
shall  be  borne  by  the  corporation  or  municipality;  if 
the  same  on  being  so  tested  shall  be  found  to  be  cor- 
rect within  the  limits  of  error  prescribed  by  the  pro- 
visions of  this  subdivision,  the  expense  of  such  inspec- 
tion and  test  shall  be  borne  by  the  consumer. 

6.  The  commission  shall  prescribe  such  rules  and 
regulations  to  carry  into  effect  the  provisions  of  this 
section  as  it  may  deem  necessary,  and  shall  fix  uniform 
reasonable  charges  for  the  inspection  and  testing  of 
meters  upon  complaint. 

§  68.  Approval  of  incorporation  and  franchises; 
certificate.  No  gas  corporation  or  electrical  corpora- 
tion shall  begin  construction  of  a  gas  plant  or  electric 
plant  without  first  having  obtained  the  permission  and 
approval  of  the  commission  of  each  district  within 
which  any  part  of  the  work  of  construction  is  to  be 
performed.  No  such  corporation  shall  exercise  any 
right  or  privilege  under  any  franchise  hereafter 
granted,  or  under  any  franchise  heretofore  granted 
but  not  heretofore  actually  exercised,  or  the  exercise 
of  which  shall  have  been  suspended  for  more  than  one 
year,  without  first  having  obtained  the  permission  and 
approval  of  the  proper  commission.  Before  such  cer- 
tificate shall  be  issued  a  certified  copy  of  the  charter 
of  such  corporations  shall  be  filed  in  the  office  of  the 
commission,  together  with  a  verified  statement  of  the 
president  and  secretary  of  the  corporation,  showing 
that  it  has  received  the  required  consent  of  the  proper 


NEW  YORK   LAW.  761 

municipal  authorities.  The  commission  within  whose 
district  such  construction  is  to  be  made,  or  within 
whose  district  such  right,  privilege  or  franchise  is  to 
be  exercised,  shall  have  power  to  grant  the  permis- 
sion and  approval  herein  specified  whenever  it  shall 
after  due  hearing  determine  that  such  construction  or 
such  exercise  of  the  right,  privilege  or  franchise  is 
necessary  or  convenient  for  the  public  service. 

No  municipality  shall  build,  maintain  and  operate 
for  other  than  municipal  purposes  any  works  or  sys- 
tems for  the  manufacture  and  supplying  of  gas  or  elec- 
tricity for  lighting  purposes  without  a  certificate  of 
authority  granted  by  the  commission.  If  the  certifi- 
cate of  authority  is  refused,  no  further  proceedings 
shall  be  taken  by  such  municipality  before  the  com- 
mission, but  a  new  application  may  be  made  therefor 
after  one  year  from  the  date  of  such  refusal. 

§  69.  Approval  of  issues  of  stock,  bonds  and  other 
forms  of  indebtedness.  A  gas  corporation  or  elec- 
trical corporation  organized  or  existing,  or  hereafter 
incorporated,  under  or  by  virtue  of  the  laws  of  the 
state  of  New  York,  may  issue  stocks,  bonds,  notes 
or  other  evidence  of  indebtedness  payable  at  periods 
of  more  than  twelve  months  after  the  date  thereof, 
when  necessary  for  the  acquisition  of  property,  the 
construction,  completion,  extension  or  improvement 
of  its  plant  or  distributing  system,  or  for  the  improve- 
ment or  maintenance  of  its  service  or  for  the  discharge 
or  lawful  refunding  of  its  obligations  or  for  the  reim- 
bursement of  moneys  actually  expended  from  income, 
or  from  any  other  moneys  in  the  treasury  of  the  cor- 
poration not  secured  or  obtained  from  the  issue  of 
stocks,  bonds,  notes  or  other  evidence  of  indebtedness 
of  such  corporation,  within  five  years  next  prior  to  the 
filing  of  an  application  with  the  proper  commission  for 


762  PUBLIC   UTILITIES. 

the  required  authorization,  for  any  of  the  aforesaid 
purposes  except  maintenance  of  service  and  except 
replacements  in  cases  where  the  appHcant  shall  have 
kept  its  accounts  and  vouchers  of  such  expenditure 
in  such  manner  as  to  enable  the  commission  to  ascer- 
tain the  amount  of  moneys  so  expended  and  the  pur- 
poses for  which  such  expenditure  was  made;  provided 
and  not  otherwise  that  there  shall  have  been  secured 
from  the  proper  commission  an  order  authorizing  such 
issue,  and  the  amount  thereof,  and  stating  the  purposes 
to  which  the  issue  or  proceeds  thereof  are  to  be  ap- 
plied, and  that,  in  the  opinion  of  the  commission,  the 
money,  property  or  labor  to  be  procured  or  paid  for 
by  the  issue  of  such  stock,  bonds,  notes  or  other  evi- 
dence of  indebtedness  is  or  has  been  reasonably  re- 
quired for  the  purposes  specified  in  the  order,  and 
that  except  as  otherwise  permitted  in  the  order  in  the 
case  of  bonds,  notes  and  other  evidence  of  indebted- 
ness, such  purposes  are  not  in  whole  or  in  part  reason- 
ably chargeable  to  operating  expenses  or  to  income. 
Nothing  herein  contained  shall  prohibit  the  commis- 
sion from  giving  its  consent  to  the  issue  of  bonds, 
notes  or  other  evidence  of  indebtedness  for  the  reim- 
bursement of  moneys  heretofore  actually  expended 
from  income  for  any  of  the  aforesaid  purposes,  except 
maintenance  of  service  and  replacements,  prior  to  five 
years  next  preceding  the  filing  of  an  application  there- 
for, if  in  the  judgment  of  the  commission  such  con- 
sent should  be  granted;  provided  application  for  such 
consent  shall  be  made  prior  to  January  first,  nineteen 
hundred  and  twelve.  For  the  purpose  of  enabling  it 
to  determine  whether  it  should  issue  such  an  order, 
the  commission  shall  make  such  inquiry  or  investiga- 
tion, hold  such  hearings  and  examine  such  witnesses, 
books,  papers,  documents  or  contracts  as  it  may  deem 
of  importance  in  enabling  it  to  reach  a  determination. 


NEW   YORK  LAW.  763 

Such  corporation  shall  not  without  the  consent  of  the 
commission  apply  said  issue  or  any  proceeds  thereof 
to  any  purpose  not  specified  in  such  order.  Such  gas 
corporation  or  electrical  corporation  may  issue  notes, 
for  proper  corporate  purposes  and  not  in  violation  of 
any  provision  of  this  or  of  any  other  act,  payable  at 
periods  of  not  more  than  twelve  months  without  such 
consent;  but  no  such  notes  shall,  in  whole  or  in  part, 
directly  or  indirectly  be  refunded  by  any  issue  of  stock 
or  bonds  or  by  any  evidence  of  indebtedness  running 
for  more  than  twelve  months  without  the  consent  of 
the  proper  commission.  Provided,  however,  that  the 
commission  shall  have  no  power  to  authorize  the  capi- 
talization of  any  franchise  or  the  right  to  own,  operate 
or  enjoy  any  franchise  whatsoever  in  excess  of  the 
amount  (exclusive  of  any  tax  or  annual  charge)  actu- 
ally paid  to  the  state  or  to  any  political  subdivision 
thereof  as  the  consideration  for  the  grant  of  such 
franchise  or  right.  Nor  shall  the  capital  stock  of  a 
corporation  formed  by  the  merger  or  consolidation  of 
two  or  more  other  corporations,  exceed  the  sum  of  the 
capital  stock  of  the  corporation,  so  consolidated,  at 
the  par  value  thereof,  or  such  sum  and  any  additional 
sum  actually  paid  in  cash ;  nor  shall  any  contract  for 
consolidation  or  lease  be  capitalized  in  the  stock  of 
any  corporation  whatever;  nor  shall  an)-  corporation 
hereafter  issue  any  bonds  against  or  as  a  lien  upon 
any  contract  for  consolidation  or  merger. 

§  69-a.  Reorganizations,  i.  Reorganizations  of 
gas  corporations  and  electrical  corporations  pursuant 
to  sections  nine  and  ten  of  the  stock  corporation  law 
and  such  other  statutes  as  may  be  enacted  from  time 
to  time  shall  be  subject  to  the  supervision  and  control 
of  the  proper  commission,  and  no  such  reorganization 


764  PUBLIC   UTILITIES. 

shall  be  had  without  the   authorization  of  such   com- 
mission. 

2.  Upon  all  such  reorganizations  the  amount  of 
capitalization,  including  therein  all  stocks  and  bonds 
and  other  evidence  of  indebtedness,  shall  be  such  as 
is  authorized  by  the  commission,  which,  in  making  its 
determination  shall  not  exceed  the  fair  value  of  the 
property  involved,  taking  into  consideration  its  original 
cost  of  construction,  duplication  cost,  present  condi- 
tion, earning  power  at  reasonable  rates  and  all  other 
relevant  matters  and  any  additional  sum  or  sums  as 
shall  be  actually  paid  in  cash,  provided,  however,  that 
the  commission  may  make  due  allowance  for  discount 
of  bonds.  Any  reorganization  agreement  before  it  be- 
comes effective  shall  be  amended  so  that  the  amount 
of  capitalization  shall  conform  to  the  amount  au- 
thorized by  the  commission. 

§  70.  Approval  of  transfer  of  franchise.  No  gas 
corporation  or  electrical  corporation  shall  transfer  or 
lease  its  franchise,  works  or  system  or  any  part  of  such 
franchise,  works  or  system  to  any  other  person  or 
corporation  or  contract  for  the  operation  of  its  works 
and  system,  without  the  written  consent  of  the  proper 
commission.  The  permission  and  approval  of  the  com- 
mission, to  the  exercise  of  a  franchise  under  section 
sixty-eight  of  this  chapter,  or  to  the  assignment,  trans- 
fer or  lease  of  a  franchise  under  this  section  shall  not 
be  construed  to  revive  or  validate  any  lapsed  or  in- 
valid franchise  or  to  enlarge  or  add  to  the  powers 
and  privileges  contained  in  the  grant  of  any  franchise 
or  to  waive  any  forfeiture.  No  such  corporation  shall 
directly  or  indirectly  acquire  the  stock  or  bonds  of 
any  other  corporation  incorporated  for,  or  engaged  in, 

[Added  by  ch.  289,  L.  1912.] 


NEW   YORK  LAW.  765 

the  same  or  a  similar  business,  or  proposing  to  operate 
or  operating  under  a  franchise  from  the  same  or  any- 
other  municipahty,  neither  shall  any  street  railroad 
corporation  acquire  the  stock  or  bonds  of  any  electrical 
corporation,  unless  authorized  so  to  do  by  the  com- 
mission. Save  where  stock  shall  be  transferred  or  held 
for  the  purpose  of  collateral  security  only  with  the 
consent  of  the  commission  empowered  by  this  chapter 
to  give  such  consent,  no  stock  corporation  of  any  de- 
scription, domestic  or  foreign,  other  than  a  gas  cor- 
poration or  electrical  corporation  or  street  railroad 
corporation,  shall  purchase  or  acquire,  take  or  hold, 
more  than  ten  per  centum  of  the  total  capital  stock 
issued  by  any  gas  corporation  or  electrical  corporation 
organized  or  existing  under  or  by  virtue  of  the  laws 
of  this  state,  except  that  a  corporation  now  lawfully 
holding  a  majority  of  the  capital  stock  of  any  gas 
corporation  or  electrical  corporation  may  with  the 
consent  of  the  commission  acquire  and  hold  the  re- 
mainder of  the  capital  stock  of  such  gas  corporation 
or  electrical  corporation  or  any  portion  thereof.  Noth- 
ing herein  contained  shall  be  construed  to  prevent  the 
holding  of  stock  heretofore  lawfully  acquired,  or  to 
prevent,  upon  the  surrender  or  exchange  of  said  stock 
pursuant  to  a  reorganization  plan,  the  purchase,  acqui- 
sition, taking  or  holding  of  a  proportionate  amount 
of  stock  of  any  new  corporation  organized  to  take 
over,  at  foreclosure  or  other  sale,  the  property  of 
any  corporation  whose  stock  has  been  thus  surrend- 
ered or  exchanged.  Every  contract,  assignment,  trans- 
fer or  agreement  for  transfer  of  any  stock  by  or 
through  any  person  or  corporation  to  any  corporation, 
in  violation  of  any  provision  of  this  chapter  shall  be 
void  and  of  no  efTect,  and  no  such  transfer  or  assign- 

[Thus  amended  by  ch.  788,  L.  1911.] 


766  PUBLIC   UTILITIES. 

ment  shall  be  made  upon  the  books  of  any  such  gas 
corporation,  or  electrical  corporation,  or  shall  be  recog- 
nized as  effective  for  any  purpose. 

§71.  Complaints  as  to  quality  and  price  of  gas 
and  electricity;  investigation  by  commission;  forms  of 
complaints.  Upon  the  complaint  in  writing  of  the 
mayor  of  a  city,  the  trustees  of  a  village  or  the  town 
board  of  a  town  in  which  a  person  or  corporation  is 
authorized  to  manufacture,  sell  or  supply  gas  or  elec- 
tricity for  heat,  light  or  power,  or  upon  the  complaint 
in  writing  of  not  less  than  one  hundred  customers  or 
purchasers  of  such  gas  or  electricity  in  cities  of  the 
first  or  second  class,  or  of  not  less  than  fifty  in  cities  of 
the  third  class,  or  of  not  less  than  twenty-five  else- 
where, or  upon  complaint  of  a  gas  corporation  or 
electrical  corporation  supplying  said  gas  or  electricity, 
as  to  the  illuminating  power,  purity,  pressure  or 
price  of  gas,  the  efficiency  of  the  electric  incandescent 
lamp  supply,  the  voltage  of  the  current  supplied  for 
hght,  heat  or  power,  or  price  of  electricity  sold  and 
delivered  in  such  municipality,  the  proper  commission 
shall  investigate  as  to  the  cause  for  such  complaint. 
When  such  complaint  is  made,  the  commission  may, 
by  its  agents,  examiners  and  inspectors,  inspect  the 
works,  system,  plant,  devices,  appliances  and  methods 
used  by  such  person  or  corporation  in  manufacturing, 
transmitting  and  supplying  such  gas  or  electricity, 
and  may  examine  or  cause  to  be  examined  the  books 
and  papers  of  such  person  or  corporation  pertaining 
to  the  manufacture,  sale,  transmitting  and  supplying 
of  such  gas  or  electricity.  The  form  and  contents  of 
complaints  made  as  provided  in  this  section  shall  be 
prescribed  by  the  commission.  Such  complaints  shall 
be  signed  by  the  officers,  or  by  the  customers,  pur- 
chasers or  subscribers  making  them,  who  must  add  to 


NEW   YORK  LAW.  767 

their    signatures    their    places    of    residence,    by    street 
and  number,  if  any. 

§  72.  Notice  and  hearing ;  order  fixing  price  of  gas 
or  electricity,  or  requiring  improvement.  Before  pro- 
ceeding under  a  complaint  presented  as  provided  in 
section  seventy-one,  the  commission  shall  cause  notice 
of  such  complaint,  and  the  purpose  thereof,  to  be 
served  upon  the  person  or  corporation  affected  there- 
by. Such  person  or  corporation  shall  have  an  oppor- 
tunity to  be  heard  in  respect  to  the  matters  com- 
plained of  at  a  time  and  place  to  be  specified  in  such 
notice.  An  investigation  may  be  instituted  by  the 
commission  as  to  any  matter  of  which  complaint  may 
be  made,  as  provided  in  section  seventy-one  of  this 
chapter,  or  to  enable  it  to  ascertain  the  facts  requisite 
to  the  exercise  of  any  power  conferred  upon  it.  After 
a  hearing  and  after  such  an  investigation  as  shall  have 
been  made  by  the  commission  or  its  officers,  agents, 
examiners  or  inspectors,  the  commission  within  law- 
ful limits  may,  by  order,  fix  the  maximum  price  of  gas 
or  electricity  not  exceeding  that  fixed  by  statute  to  be 
charged  by  such  corporation  or  person,  for  the  service 
to  be  furnished;  and  may  order  such  improvement  in 
the  manufacture,  distribution  or  supply  of  gas,  in  the 
manufacture,  transmission  or  supply  of  electricity,  or 
in  the  methods  employed  by  such  person  or  corpora- 
tion, as  will  in  its  judgment  be  adequate,  just  and 
reasonable.  The  price  fixed  by  the  commission  under 
this  section  or  under  subdivision  five  of  section  thirty- 
six  shall  be  the  maximum  price  to  be  charged  by  such 
person,  corporation  or  municipality  for  gas  or  elec- 
tricity for  the  service  to  be  furnished  within  the  terri- 
tory and  for  a  period  to  be  fixed  by  the  commission 
in  the  order,  not  exceeding  three  years  except  in  the 
case   of  a   sliding  scale,    and   thereafter  until   the   com- 


768  PUBLIC    UTILITIES. 

mission  shall,  upon  its  own  motion  or  upon  the  com- 
plaint of  any  corporation,  person  or  municipality  in- 
terested, fix  a  higher  or  lower  maximum  price  of  gas 
or  electricity  to  be  thereafter  charged.  In  determin- 
ing the  price  to  be  charged  for  gas  or  electricity  the 
commission  may  consider  all  facts  which  in  its  judg- 
ment have  any  bearing  upon  a  proper  determination 
of  the  question  although  not  set  forth  in  the  complaint 
and  not  within  the  allegations  contained  therein,  with 
due  regard  among  other  things  to  a  reasonable  average 
return  upon  capital  actually  expended  and  to  the  ne- 
cessity of  making  reservations  out  of  income  for  sur- 
plus and  contingencies, 

§  73.  Forfeiture  for  noncompliance  with  order. 
Every  gas  corporation  and  electrical  corporation  and 
the  officers,  agents  and  employees  thereof  shall  obey, 
observe  and  comply  with  every  order  made  by  the 
commission  under  authority  of  this  chapter  so  long 
as  the  same  shall  be  and  remain  in  force.  Any  such 
person  or  corporation,  or  any  officer,  agent  or  employee 
thereof,  who  knowingly  fails  or  neglects  to  obey  or 
comply  with  such  order,  or  any  provision  of  this  chap- 
ter, shall  forfeit  to  the  state  of  New  York  not  to  ex- 
ceed the  sum  of  one  thousand  dollars  for  each  ofifense. 
Every  distinct  violation  of  any  such  order  or  of  this 
chapter  shall  be  a  separate  and  distinct  offense,  and 
in  case  of  a  continuing  violation  each  day  shall  be 
deemed  a  separate  and  distinct  ofifense. 

§  74.  Summary  proceedings.  Whenever  either 
commission  shall  be  of  opinion  that  a  gas  corporation, 
electrical  corporation  or  municipality  within  its  juris- 
diction is  failing  or  omitting  or  about  to  fail  or  omit  to 
do  anything  required  of  it  by  law  or  by  order  of  the 
commission  or  is  doing  anything  or  about  to  do  any- 


NEW   YORK  LAW.  769 

thing  or  permitting  anything  or  about  to  permit  any- 
thing to  be  done,  contrary  to  or  in  violation  of  law  or 
of  any  order  of  the  commission,  it  shall  direct  counsel 
to  the  commission  to  commence  an  action  or  proceed- 
ing in  the  supreme  court  of  the  state  of  New  York  in 
the  name  of  the  commission  for  the  purpose  of  having 
such  violations  or  threatened  violations  stopped  and 
prevented  either  by  mandamus  or  injunction.  Counsel 
to  the  commission  shall  thereupon  begin  such  action 
or  proceeding  by  a  petition  to  the  supreme  court 
alleging  the  violation  complained  of  and  praying  for 
appropriate  relief  by  way  of  mandamus  or  injunction. 
It  shall  thereupon  be  the  duty  of  the  court  to  specify 
the  time  not  exceeding  twenty  days  after  service  of  a 
copy  of  the  petition  within  which  the  gas  corporation, 
electrical  corporation  or  municipality  complained  of 
must  answer  the  petition.  In  case  of  default  in  answer 
or  after  answer,  the  court  shall  immediately  inquire 
into  the  facts  and  circumstances  in  such  manner  as 
the  court  shall  direct  without  other  or  formal  plead- 
ings, and  without  respect  to  any  technical  requirement. 
Such  other  persons  or  corporations,  as  it  shall  seem 
to  the  court  necessary  or  proper  to  join  as  parties  in 
order  to  make  its  order,  judgment  or  writs  effective, 
may  be  joined  as  parties  upon  application  of  counsel 
to  the  commission.  The  final  judgment  in  any  such 
action  or  proceeding  shall  either  dismiss  the  action  or 
proceeding  or  direct  that  a  writ  of  mandamus  or  an 
injunction  or  both  issue  as  prayed  for  in  the  petition 
or  in  such  modified  or  other  form  as  the  court  may 
determine  will  aft'ord  appropriate  relief. 

§  75.  Defense  in  case  of  excessive  charges  for  gas 
or  electricity.  If  it  be  alleged  and  established  in  an 
action  brought  in  any  court  for  the  collection  of  any 
charge    for    gas    or   electricity,    that    a    price    has   been 

49— Pub.  Ut. 


'J'JQ  PUBLIC   UTILITIES. 

demanded  in  excess  of  that  fixed  by  the  commission 
or  by  statute  in  the  municipahty  wherein  the  action 
arose,  no  recovery  shall  be  had  therein,  but  the  fact 
that  such  excessive  charges  have  been  made  shall  be 
a  complete  defense  to  such  action. 

§  76.  Jurisdiction.  The  words  "proper  commis- 
sion," when  used  in  this  article,  mean  the  commission 
of  the  district  within  which  the  person  or  corporation 
affected  supplies  or  proposes  to  supply  the  whole  or 
the  greater  part  of  the  service  rendered  by  it.  But 
nothing  herein  contained  shall  be  construed  to  deprive 
the  commission  of  either  district  of  the  power  of  super- 
vision and  regulation  within  its  district.  And  either 
commission  shall  have  power  to  enter  and  inspect  the 
plant  of  such  corporation,  wherever  situated. 

§  "jj.  Powers  of  local  ofificers.  If  in  any  city  of 
the  first  or  second  class  there  now  exists  or  shall  here- 
after be  created  a  board,  body  or  officer  having  juris- 
diction of  matters  pertaining  to  gas  or  electric  serv- 
ice, such  board,  body  or  ofiEicer  shall  have  and  may 
exercise  such  power,  jurisdiction  and  authority  in  en- 
forcing the  laws  of  the  state  and  the  orders,  rules  and 
regulations  of  the  commission  as  may  be  prescribed 
by  statute  or  by  the  commission. 


NEW   YORK   LAW.  77I 


ARTICLE  v.* 

Provisions  Relating  to  Telegraph  and  Telephone  Lines 
and  to  Telephone  and  Telegraph  Corporations. 

Section  90.  Application  of  article. 

91.  Adequate  service;   just  and  reasonable  charges;   unjust 

discrimination;  unreasonable  preference. 

92.  Rate  schedules. 

93.  Liability  for  loss  or  damage  caused  by  violation  of  this 

chapter. 

94.  General  powers  and  duties  of  commission  in  respect  to 

telegraph  corporations  and  telephone  corporations. 

95.  Reports   of  telegraph   corporations   and   telephone  cor- 

porations. 

96.  Investigations  by  commission. 

97.  Rates,  rentals  and  service. 

98.  Powers  of  commission  to  order  repairs  or  changes. 

99.  Franchises  and  privileges. 

100.  Transfer  and  ownership  of  stocks. 

101.  Approval  of  issues  of  stocks,  bonds  and  other  forms  of 

indebtedness. 
101-a.  Reorganization. 

102.  Forfeitures;  penalties. 

103.  Summary  proceedings. 

§  90.  Application  of  article.  The  provision  of  this 
article  shall  apply  to  communication  by  telegraph  or 
telephone  between  one  point  and  another  within  the 
state  of  New  York  and  to  every  telegraph  corporation 
and  telephone  corporation. 

§91.  Adequate  service;  just  and  reasonable 
charges;  unjust  discrimination;  unreasonable  prefer- 
ence. I.  Every  telegraph  corporation  and  every  tele- 
phone  corporation   shall    furnish   and   provide   with   re- 


*  Article  V  Inserted  by  eh.  673,  L.  1910.  By  same  chapter  former 
Article  V  was  renumbered  Article  VI  and  sections  80  to  87  inclusive 
renumbered  respectively  120  to  127  inclusive. 


'J']2  PUBLIC   UTILITIES. 

spect  to  its  business  such  instrumentalities  and  facili- 
ties as  shall  be  adequate  and  in  all  respects  just  and 
reasonable.  All  charges  made  or  demanded  by  any 
telegraph  corporation  or  telephone  corporation  for 
any  service  rendered  or  to  be  rendered  in  connection 
therewith  shall  be  just  and  reasonable  and  not  more 
than  allowed  by  law  or  by  order  of  the  commission. 
Every  unjust  or  unreasonable  charge  made  or  de- 
manded for  any  such  service  or  in  connection  there- 
with or  in  excess  of  that  allowed  by  law  or  by  order  of 
the  commission  is  prohibited  and  declared  to  be  unlaw- 
ful. 

2.  No  telegraph  corporation  or  telephone  corpo- 
ration shall  directly  or  indirectly  or  by  any  special  rate, 
rebate,  drawback  or  other  device  or  method  charge, 
demand,  collect  or  receive  from  any  person  or  corpo- 
ration a  greater  or  less  compensation  for  any  service 
rendered  or  to  be  rendered  with  respect  to  communi- 
cation by  telegraph  or  telephone  or  in  connection 
therewith,  except  as  authorized  in  this  chapter,  than  it 
charges,  demands,  collects  or  receives  from  any  other 
person  or  corporation  for  doing  a  like  and  contem- 
poraneous service  with  respect  to  communication  by 
telegraph  or  telephone  under  the  same  or  substantially 
the  same  circumstances  and  conditions. 

3.  No  telegraph  corporation  or  telephone  corpora- 
tion shall  make  or  give  any  undue  or  unreasonable 
preference  or  advantage  to  any  person,  corporation  or 
locality,  or  subject  any  particular  person,  corporation 
or  locality  to  any  undue  or  unreasonable  prejudice 
or  disadvantage  in  any  respect  whatsoever. 

4.  Nothing  in  this  chapter  shall  be  construed  to 
prevent  any  telegraph  corporation  or  telephone  cor- 
poration from  continuing  to  furnish  the  use  of  its 
lines,  equipment  or  service  under  any  contract  or  con- 
tracts in  force  at  the  date  this  article  takes  effect  or 


NEW   YORK  LAW.  773 

upon  the  taking  effect  of  any  schedule  or  schedules 
of  rates  subsequently  filed  with  the  commission,  as 
hereinafter  provided,  at  the  rate  or  rates  fixed  in  such 
contract  or  contracts;  provided,  however,  that  when 
any  such  contract  or  contracts  are  or  become  termin- 
able by  notice,  the  commission  shall  have  power,  in 
its  discretion,  to  direct  by  order  that  such  contract  or 
contracts  shall  be  terminated  by  the  telegraph  corpora- 
tion or  telephone  corporation  party  thereto,  and  there- 
upon such  contract  or  contracts  shall  be  terminated  by 
such  telegraph  corporation  or  telephone  corporation 
as  and  when  directed  by  such  order. 

§92.  Rate  schedules,  i.  Every  telegraph  corpo- 
ration and  every  telephone  corporation  shall  print  and 
file  with  the  commission  schedules  showing  all  rates, 
rentals  and  charges  for  service  of  each  and  every  kind 
by  or  over  its  line  between  points  in  this  state  and  be- 
tween each  point  upon  its  line  and  all  points  upon 
every  line  leased  or  operated  by  it  and  between  each 
point  upon  its  line  or  upon  any  line  leased  or  operated 
by  it  and  all  points  upon  the  line  of  any  other  tele- 
graph or  telephone  corporation  whenever  a  through 
service  or  joint  rate  shall  have  been  established  be- 
tween any  two  points.  If  no  joint  rate  over  a  through 
line  has  been  established  the  several  corporations  in 
such  through  line  shall  file  with  the  commission  the 
separately  established  rates  and  charges  applicable 
where  through  service  is  afforded.  Such  schedule  shall 
plainly  state  the  places  between  which  telephone  or 
telegraph  service,  or  both,  will  be  rendered  and  shall 
also  state  separately  all  charges  and  all  privileges  or 
facilities  granted  or  allowed  and  any  rules  or  regula- 
tions or  forms  of  contract  which  may  in  any  wise 
change,  affect  or  determine  any  or  the  aggregate  of 
the  rates,  rentals  or  charges  for  the  service  rendered. 


774  PUBLIC   UTILITIES. 

Such  schedule  shall  be  plainly  printed  and  kept  open 
to  public  inspection.  The  commission  shall  have  the 
power  to  prescribe  the  form  of  every  such  schedule 
and  may  from  time  to  time  prescribe,  by  order, 
changes  in  the  form  thereof.  The  commission  shall 
also  have  power  to  establish  rules  and  regulations  for 
keeping  such  schedules  open  to  public  inspection  and 
may  from  time  to  time  modify  the  same.  Every  tele- 
graph corporation  and  telephone  corporation  shall  file 
with  the  commission  as  and  when  required  by  it  a 
copy  of  any  contract,  agreement  or  arrangement  in 
writing  with  any  other  telegraph  corporation  or  tele- 
phone corporation  or  with  any  other  corporation,  asso- 
ciation or  person  relating  in  any  way  to  the  construc- 
tion, maintenance  or  use  of  a  telegraph  line  or  tele- 
phone line  or  service  by  or  rates  and  charges  over 
or  upon  any  such  telegraph  line  or  telephone  line. 

2.  Unless  the  commission  otherwise  orders  no 
change  shall  be  made  in  any  rate,  charge  or  rental,  or 
joint  rate,  charge  or  rental  which  shall  have  been  filed 
by  a  telegraph  corporation  or  telephone  corporation  in 
compliance  with  the  requirements  of  this  chapter, 
except  after  thirty  days'  notice  to  the  commission, 
which  notice  shall  plainly  state  the  changes  proposed 
to  be  made  in  the  schedule  then  in  force  and  the  time 
when  the  changed  rate,  charge  or  rental  shall  go  into 
effect ;  and  all  proposed  changes  shall  be  shown  by 
filing  new  schedules  or  shall  be  plainly  indicated  upon 
the  schedules  filed  and  in  force  at  the  time  and  kept 
open  to  public  inspection.  The  commission,  for  good 
cause  shown,  may  allow  changes  in  rates,  charges  or 
rentals  without  requiring  the  thirty  days'  notice,  under 
such  conditions  as  it  may  prescribe ;  all  such  changes 
shall  be  immediately  indicated  upon  its  schedules  by 
such  telegraph  corporation  or  telephone  corporation. 
No    telegraph    corporation    or    telephone    corporation 


NEW  YORK  LAW.  775 

shall  charge,  demand,  collect  or  receive  a  different 
compensation  for  any  service  rendered  or  to  be  ren- 
dered than  the  charge  applicable  to  such  service  as 
specified  in  its  schedule  on  file  and  in  effect  at  that 
time.  Nor  shall  any  telegraph  corporation  or  tele- 
phone corporation  refund  or  remit  directly  or  indi- 
rectly any  portion  of  the  rate  or  charge  so  specified, 
nor  extend  to  any  person  or  corporation  any  form  of 
contract  or  agreement,  or  any  rule  or  regulation,  or 
any  privilege  or  facility,  except  such  as  are  specified  in 
its  schedule  filed  and  in  effect  at  the  time  and  regu- 
larly and  uniformly  extended  to  all  persons  and  cor- 
porations under  like  circumstances  for  the  like  or  sub- 
stantially similar  service. 

3.  No  telegraph  corporation  or  telephone  corpora- 
tion subject  to  the  provisions  of  this  chapter  shall, 
directly  or  indirectly,  give  any  free  or  reduced  service, 
or  any  free  pass  or  frank  for  the  transmission  of  mes- 
sages by  either  telephone  or  telegraph  between  points 
within  this  state,  except  to  its  officers,  employees, 
agents,  pensioners,  surgeons,  physicians,  attorneys-at- 
law  and  their  families;  to  persons  or  corporations  ex- 
clusively engaged  in  charitable  and  eleemosynary  work 
and  ministers  of  religions;  to  officers  and  employees 
of  other  telegraph  corporations  and  telephone  corpo- 
rations, railroad  corporations  and  street  railroad  cor- 
porations. But  this  subdivision  shall  not  apply  to 
state,  municipal  or  federal  contracts. 

§  93.  Liability  for  loss  or  damage  caused  by  viola- 
tion of  this  chapter.  In  case  any  telegraph  corpora- 
tion or  telephone  corporation  shall  do  or  cause  to  be 
done  or  permit  to  be  done  any  act,  matter  or  thing 
prohibited,    forbidden   or   declared    to   be    unlawful,    or 

[Thus  amended  by  ch.  124,  L.  1911.] 


yyd  PUBLIC  utilities. 

shall  omit  to  do  any  act,  matter  or  other  thing  re- 
quired to  be  done,  either  by  law  of  the  state  of  New- 
York  by  this  chapter  or  by  any  order  of  the  commis- 
sion, such  telegraph  corporation  or  telephone  corpora- 
tion shall  be  liable  to  the  person  or  corporation  affected 
thereby  for  all  loss,  damage  or  injury  caused  thereby 
or  resulting  therefrom  and  in  case  of  recovery  if  the 
court  shall  find  that  such  an  act  or  omission  was  wil- 
ful it  may  in  its  discretion  fix  a  reasonable  counsel  or 
attorney's  fee,  which  fee  shall  be  taxed  and  collected 
as  a  part  of  the  costs  in  the  action.  An  action  to  re- 
cover for  such  loss,  damage  or  injury  may  be  brought 
in  any  court  of  competent  jurisdiction  by  any  such 
person   or   corporation. 

§  94.  General  powers  and  duties  of  commission  in 
respect  to  telegraph  corporations  and  telephone  corpo- 
rations. I.  The  commission  and  each  commissioner 
shall  have  power  and  authority  to  administer  oaths  in 
all  parts  of  the  state  to  witnesses  summoned  to  testify 
in  any  inquiry,  investigation,  hearing,  or  proceeding, 
and  also  to  administer  oaths  in  all  parts  of  the  state 
whenever  the  exercise  of  such  power  is  incidentally 
necessary  or  proper  to  enable  the  commission  or  a 
commissioner  to  perform  a  duty  or  to  exercise  a  power. 

2.  The  commission  shall  have  general  supervision 
of  all  telegraph  corporations,  telephone  corporations 
and  telegraph  lines  and  telephone  lines  within  its 
jurisdiction  as  hereinbefore  defined  and  shall  have 
power  to  and  shall  examine  the  same  and  keep  in- 
formed as  to  their  general  condition,  their  capitaliza- 
tion, their  franchises  and  the  manner  in  which  their 
lines  and  property  are  leased,  operated  or  managed, 
conducted  and  operated  with  respect  to  the  adequacy 
of  and  accommodation  afforded  by  their  service  and 
also  with  respect  to  the  safety  and  security  of  their 


NEW   YORK  LAW.  ']^^ 

lines  and  property,  and  with  respect  to  their  compli- 
ance with  all  provisions  of  law,  orders  of  the  commis- 
sion, franchises  and  charter  requirements.  The  com- 
mission shall  have  power  either  through  its  members 
or  inspectors  or  employees  duly  authorized  by  it  to 
enter  in  or  upon  and  to  inspect  the  property,  equip- 
ment, buildings,  plants,  factories,  offices,  apparatus, 
machines,  devices  and  lines  of  any  telegraph  corpora- 
tion or  telephone  corporation. 

3.  The  commission  and  each  commissioner  shall 
have  power  to  examine  all  books,  contracts,  records, 
documents  and  papers  of  any  telegraph  corporation  or 
telephone  corporation  and  by  subpoena  duces  tecum 
to  compel  the  production  thereof,  or  of  duly  verified 
copies  of  the  same  or  of  any  of  them. 

§  95.  Reports  of  telegraph  corporations  and  tele- 
phone corporations,  i.  Every  telegraph  corporation 
and  every  telephone  corporation  shall  file  with  the 
commission  an  annual  report  at  a  time  and  covering 
the  yearly  period  fixed  by  the  commission.  Such 
annual  report  shall  be  verified  by  the  oath  of  the  presi- 
dent, treasurer,  general  manager  or  receiver  of  any  of 
such  corporations,  or  by  the  person  required  to  file  the 
same.  Verification  shall  be  made  by  the  official  hold- 
ing office  at  the  time  of  the  filing  of  said  report,  and 
if  not  made  upon  the  knowledge  of  the  person  verify- 
ing the  same  shall  set  forth  in  general  terms  the 
sources  of  his  information  and  the  grounds  for  his  be- 
lief as  to  any  matters  not  stated  to  be  verified  on  his 
knowledge.  The  commission  shall  prescribe  the  form 
of  such  reports  and  the  character  of  the  information  to 
be  contained  therein  and  may,  from  time  to  time,  make 
such  changes  and  additions  in  regard  to  form  and 
contents  thereof  as  it  may  deem  proper,  and  shall 
furnish  a  blank  form  for  such  annual  reports  to  every 


yy^  PUBLIC  UTILITIES. 

telegraph  corporation  and  every  telephone  corporation 
required  to  make  the  same.  When  the  report  of  any 
telegraph  corporation  or  telephone  corporation  is  de- 
fective or  erroneous  the  commission  shall  notify  the 
corporation  to  amend  the  same  within  a  time  pre- 
scribed by  the  commission.  The  said  reports  shall  be 
preserved  in  the  office  of  the  commission.  The  com- 
mission may  require  of  any  telegraph  corporation  or 
telephone  corporation  specific  answ^ers  to  questions 
upon  which  the  commission  may  desire  information. 
If  any  telegraph  corporation  or  telephone  corporation 
shall  fail  to  make  and  file  its  annual  report  as  and  when 
required  or  within  such  extended  time  as  the  commis- 
sion may  allow  or  shall  fail  to  make  specific  answers 
to  any  question  within  the  period  specified  by  the  com- 
mission for  the  making  and  filing  of  such  answers, 
such  corporation  shall  forfeit  to  the  state  the  sum  of 
one  hundred  dollars  for  each  and  every  day  it  shall 
continue  to  be  in  default  with  respect  to  such  report 
or  answer.  Such  forfeiture  shall  be  recovered  in  an 
action  brought  by  the  commission  in  the  name  of  the 
people  of  the  state  of  New  York.  The  amount  re- 
covered in  any  such  action  shall  be  paid  into  the 
state  treasury  and  shall  be  credited  to  the  general  fund. 
The  commission  may,  when  it  deems  it  advisable,  ex- 
empt any  telegraph  corporation  or  telephone  corpora- 
tion from  the  necessity  of  filing  annual  reports  until 
the  further  order  of  the  commission. 

2.  The  commission  may  establish  a  system  of 
accounts  to  be  used  by  telegraph  corporations  and  tele- 
phone corporations,  which  are  subject  to  its  jurisdic- 
tion, and  are  required  to  make  annual  reports  to  it 
or  classify  the  said  corporations,  and  prescribe  a  sys- 
tem of  accounts  for  each  class  and  may  prescribe  the 
manner  in  which  such  accounts  shall  be  kept.  It  may 
also,  in  its  discretion  prescribe  the  form  of  records  to 


NEW  YORK  LAW.  779 

be  kept  by  such  corporation.  Notice  of  alterations  by 
the  commission  in  the  required  method  or  form  of 
keeping  accounts  shall  be  given  to  such  corporations 
by  the  commission  at  least  six  months  before  the  same 
are  to  take  effect.  The  commission  shall  at  all  times 
have  access  to  all  accounts,  records  and  memoranda 
kept  by  telegraph  corporations  and  telephone  corpora- 
tions, and  may  designate  any  of  its  officers  or  em- 
ployees who  shall  thereupon  be  authorized  under  the 
order  of  the  commission  to  inspect  and  examine  any 
and  all  accounts,  records  and  memoranda  kept  by  any 
such  corporation;  and  the  commission  may,  after 
hearing,  prescribe  by  order,  the  accounts  in  which 
particular  outlays  and  receipts  shall  be  entered,  charged 
or  credited.  Any  employee  or  agent  of  the  commis- 
sion who  divulges  any  fact  or  information  which  may 
come  to  his  knowledge  during  the  course  of  any  such 
inspection  or  examination  except  in  so  far  as  he  may 
be  directed  by  the  commission  or  by  a  court  or  judge 
thereof,  or  authorized  by  law,  shall  be  guilty  of  a 
misdemeanor.  Any  provision  of  law  prohibiting  the 
disclosure  of  the  contents  of  telegraph  messages  or 
the  contents  or  substance  of  telephone  communica- 
tions shall  not  be  deemed  to  prohibit  the  disclosure  of 
any  matter  in  accordance  with  the  provisions  of  this 
chapter. 

§96.  Investigations  by  commission.  i.  The 
commission  may  of  its  own  motion  investigate  or  make 
inquiry  in  a  manner  to  be  determined  by  it  as  to  any 
act  done  or  omitted  to  be  done  by  any  telegraph  cor- 
poration or  telephone  corporation  and  the  commission 
must  make  such  inquiry  in  regard  to  any  act  done  or 
omitted  to  be  done  by  any  telegraph  corporation  or 
telephone  corporation  in  violation  of  any  provisions  of 
law  or  in  violation  of  anv  order  of  the  commission. 


780  PUBLIC   UTILITIES. 

2.  Complaints  may  be  made  to  the  commission 
by  any  person  or  corporation  aggrieved,  by  petition  or 
complaint  in  writing,  setting  forth  any  act  done  or 
omitted  to  be  done  by  any  telegraph  corporation  or 
telephone  corporation  alleged  to  be  in  violation  of 
the  terms  or  conditions  of  its  franchise  or  charter  or 
of  any  order  of  the  commission.  Upon  the  presenta- 
tion of  such  a  complaint  the  commission  shall  cause  a 
copy  thereof  to  be  forwarded  to  the  person  or  corpora- 
tion complained  of  which  may  be  accompanied  by  an 
order  directed  to  such  person  or  corporation  requiring 
that  the  matters  complained  of  be  satisfied  or  that  the 
charges  be  answered  in  writing  within  a  time  to  be. 
specified  by  the  commission.  If  the  person  or  cor- 
poration complained  of  shall  make  reparation  for  any 
injury  alleged  and  shall  cease  to  commit  or  permit  the 
violation  of  law,  franchise,  charter  or  order  charged  in 
the  complaint,  if  any  there  be,  and  shall  notify  the 
commission  of  that  fact  before  the  time  allowed  for 
answer,  the  commission  need  take  no  further  action 
upon  the  charges.     If,  however,  the  charges  contained 

in  such  petition  be  not  thus  satisfied  and  it  shall  ap-  ■ 

pear    to    the    commission    that    there    are    reasonable  f 

grounds  therefor,  it  shall  investigate  such  charges  in  | 

such    manner    and   by    such    means    as    it    shall    deem 
proper  and  take  such  action  within  its  powers  as  the  * 

facts  in  its  judgment  justify. 

3.  Whenever  the  commission  shall  investigate  any 
matter  complained  of  by  any  person  or  corporation 
aggrieved  by  any  act  or  omission  of  a  telegraph  cor- 
poration or  telephone  corporation  under  this  section, 
it  shall  be  its  duty  within  sixty  days  after  final  sub- 
mission to  make  and  file  an  order  either  dismissing 
the  petition  or  complaint  or  directing  the  telegraph 
corporation  or  telephone  corporation  complained  of  to 


NEW  YORK  LAW.  78 1 

satisfy  the  cause  of  complaint  in  whole  or  to  the  extent 
which  the  commission  may  specify  and  require. 

§  97.  Rates,  rentals  and  service,  i.  Whenever 
the  commission  shall  be  of  opinion,  after  a  hearing, 
had  upon  its  own  motion  or  upon  a  complaint  that 
the  rates,  charges,  tolls  or  rentals  demanded,  exacted, 
charged  or  collected  by  any  telegraph  corporation  or 
telephone  corporation  subject  to  its  jurisdiction  for  the 
transmission  of  messages  or  communications  by  tele- 
graph or  telephone  or  for  the  rental  or  use  of  any 
telegraph  line,  telephone  line  or  any  telegraph  instru- 
ment, wire,  appliances,  apparatus  or  device  or  any 
telephone  receiver,  transmitter,  instrument,  wire,  cable, 
apparatus,  conduit,  machine,  appliance  or  device  or 
any  telephone  extension  or  extension  system  or  that 
the  rules,  regulations  or  practices  of  any  telegraph 
corporation  or  telephone  corporation  affecting  such 
rates,  charges,  rentals  or  service  are  unjust,  unreason- 
able or  unjustly  discriminatory  or  unduly  preferential 
or  in  any  wise  in  violation  of  law,  or  that  the  maxi- 
mum rates,  charges  or  rentals  chargeable  by  any  such 
telegraph  corporation  or  telephone  corporation  are 
insuf^cient  to  yield  reasonable  compensation  for  the 
service  rendered,  the  commission  shall  with  due  re- 
gard, among  other  things,  to  a  reasonable  average  re- 
turn upon  the  value  of  the  property  actually  used  in 
the  public  service  and  of  the  necessity  of  making 
reservation  out  of  income  for  surplus  and  contingen- 
cies determine  the  just  and  reasonable  rates,  charges 
and  rentals  to  be  thereafter  observed  and  in  force  as 
the  maximum  to  be  charged,  demanded,  exacted  or 
collected  for  the  performance  or  rendering  of  the  serv- 
ice specified  and  shall  fix  the  same  by  order  to  be 
served  upon  all  telegraph  corporations  and  telephone 
corporations  by  which  sucli  rates,  charges  and  rentals 


782  PUBLIC  UTILITIES. 

are  thereafter  to  be  observed,  and  thereafter  no  in- 
crease in  any  rate,  charge  or  rental  so  fixed  shall  be 
made  without  the  consent  of  the  commission. 

2.  Whenever  the  commission  shall  be  of  the  opin- 
ion, after  a  hearing  had  upon  its  own  motion  or  upon 
complaint  that  the  rules,  regulations  or  practices  of  any 
telegraph  corporation  or  telephone  corporation  are 
unjust  or  unreasonable  or  that  the  equipment  or  serv- 
ice of  any  telegraph  corporation  or  telephone  corpora- 
tion is  inadequate,  inefBcient,  improper  or  insufficient, 
the  commission  shall  determine  the  just,  reasonable, 
adequate,  efficient  and  proper  regulations,  practices, 
equipment  and  service  thereafter  to  be  installed,  to  be 
observed  and  used,  and  to  fix  and  prescribe  the  same 
by  order  to  be  served  upon  every  telegraph  corporation 
and  telephone  corporation  to  be  bound  thereby  and 
thereafter  it  shall  be  the  duty  of  every  telegraph  cor- 
poration and  telephone  corporation  to  which  such  order 
is  directed  to  obey  each  and  every  such  order  so  served 
upon  it  and  to  do  everything  necessary  or  proper  in 
order  to  secure  compliance  with  and  observance  of 
every  such  order  by  all  its  officers,  agents  and  em- 
ployees according  to  its  true  intent  and  meaning. 
Nothing  contained  in  this  chapter  shall  be  construed 
as  giving  to  the  commission  power  to  make  any  order, 
direction  or  requirement  requiring  any  telegraph  cor- 
poration or  telephone  corporation  to  perform  any  act 
which  is  unjust  or  unreasonable  or  in  violation  of  any 
law  of  this  state  or  of  the  United  States  not  incon- 
sistent with  the  provisions  of  this  chapter. 

3.  The  commission  shall  have  power  by  order  to 
require  any  two  or  more  telegraph  corporations  whose 
lines  form  a  continuous  line  of  communication,  or 
could  be  made  to  do  so  by  the  construction  and 
maintenance  of  suitable  connections  or  transfer  of 
messages  at  common  points,  between  different  localities 


NEW   YORK  LAW.  783 

which  are  not  reached  by  the  line  o{  either  company 
alone,  to  establish  through  lines  within  the  state  be- 
tween two  or  more  such  localities  and  joint  rates  or 
charges  for  service  by  or  over  said  lines  as  the  com- 
mission may  by  its  order  prescribe  and  in  case  such 
through  lines  and  joint  rates  be  not  established  by  the 
corporations  named  in  any  such  order  within  the  time 
therein  specified,  the  commission  shall  have  power  by 
order  to  establish  the  same  and  to  fix  the  just  and 
reasonable  rates  and  charges  to  be  charged  for  such 
through  service  and  to  declare  the  portion  thereof  to 
which  each  of  the  corporations  affected  thereby  shall 
be  entitled  and  the  manner  in  which  the  same  shall 
be  secured  and  paid. 

§  98.  Power  of  commission  to  order  repairs  or 
changes.  Whenever  the  commission  shall  be  of  opin- 
ion, after  a  hearing  had  upon  its  own  motion,  or  upon 
a  complaint,  that  repairs  or  improvements  to  or 
changes  in  any  telegraph  line  or  any  telephone  line 
ought  reasonably  to  be  made,  or  that  any  additions 
should  reasonably  be  made  thereto,  in  order  to  pro- 
mote the  convenience  of  the  public  or  employees,  or  in 
order  to  secure  adequate  service  or  facilities  for 
telegraphic  or  telephonic  communications,  the  com- 
mission shall  make  and  serve  an  order  directing  that 
such  repairs,  improvements,  changes  or  additions  be 
made  within  a  reasonable  time  and  in  a  manner  to  be 
specified  therein  and  every  telegraph  corporation  and 
telephone  corporation  is  hereby  required  and  directed 
to  make  all  repairs,  improvements,  changes  and  addi- 
tions required  of  it  by  any  order  of  the  commission 
served  upon  it. 

§99.  Franchises  and  privileges,  i.  No  telegraph 
corporation  or  telephone  corporation  hereafter  formed 


784  PUBLIC   UTILITIES. 

shall  begin  construction  of  its  telegraph  line  or  tele- 
phone line  without  first  having  obtained  the  permission 
and  approval  of  the  commission  and  its  certificate  of 
public  convenience  and  necessity,  after  a  hearing  had 
upon  such  notice  as  the  commission  may  prescribe. 
Before  any  such  certificate  shall  be  issued  there  must 
be  filed  in  the  office  of  the  commission  by  the  appli- 
cant therefor  a  verified  statement  showing  that  the 
required  consent  of  the  proper  municipal  authorities 
has  been  obtained. 

2.  No  franchise  or  any  right  to  or  under  any 
franchise  to  own  or  operate  a  telegraph  line  or  tele- 
phone line  shall  be  assigned,  transferred  or  leased,  nor 
shall  any  contract  or  agreement  hereafter  made  with 
reference  to  or  affecting  any  such  franchise  or  right 
be  valid  or  of  any  force  or  effect  whatever  unless  the 
assignment,  transfer,  lease,  contract  or  agreement  shall 
have  been  approved  by  the  commission.  No  franchise 
or  right  to  or  under  any  franchise  to  own  or  operate 
a  telegraph  line  or  telephone  line  shall  be  assigned, 
transferred  or  leased  to  or  owned  or  operated  by  any 
foreign  corporation. 

3.  The  approval  of  the  commission  to  the  exercise 
of  a  franchise  or  to  the  assignment,  transfer  or  lease 
of  a  franchise  shall  not  be  construed  to  revive  or  val- 
idate any  lapsed  or  invalid  franchise  or  to  enlarge  or 
add  to  the  powers  and  privileges  contained  in  the 
grant  of  any  franchise  or  to  waive  any  forfeiture. 

§  100.  Transfer  and  ownership  of  stock.  Save 
where  stock  shall  be  transferred  or  held  for  the  pur- 
pose of  collateral  security,  no  stock  corporation,  do- 
mestic or  foreign,  other  than  a  telegraph  corporation 
or  telephone  corporation,  shall,  without  the  consent 
of  the  commission,  purchase  or  acquire,  take  or  hold 
more   than  ten  per  centum   of  the   total   capital   stock 


I 


NEW  YORK  LAW.  785 

issued  by  any  telegraph  corporation  or  telephone  cor- 
poration organized  or  existing  under  or  by  virtue  of 
the  laws  of  this  state,  except  that  a  corporation  now 
lawfully  holding  a  majority  of  the  capital  stock  of  any 
telegraph  corporation  or  telephone  corporation  may, 
without  the  consent  of  the  commission,  acquire  and 
hold  the  remainder  of  the  capital  stock  of  such  tele- 
graph corporation  or  telephone  corporation,  or  any 
portion  thereof.  Nothing  herein  contained  shall  be 
construed  to  prevent  the  holding  of  stock  heretofore 
lawfully  acquired,  or  to  prevent,  upon  the  surrender 
or  exchange  of  said  stock  pursuant  to  a  reorganization 
plan,  the  purchase,  acquisition,  taking  or  holding  of  a 
proportionate  amount  of  stock  of  any  new  corporation 
organized  to  take  over,  at  foreclosure  or  other  sale 
the  property  of  any  corporation  whose  stock  has  been 
thus  surrendered  or  exchanged.  Every  contract,  as- 
signment, transfer  or  agreement  for  transfer  of  any 
stock  by  or  through  any  person  or  corporation  to  any 
corporation  in  violation  of  any  provision  of  this  chap- 
ter shall  be  void  and  of  no  elTect,  and  no  such  transfer 
or  assignment  shall  be  made  upon  the  books  of  any 
such  telegraph  corporation  or  telephone  corporation,  or 
shall  be  recognized  as  effective  for  any  purpose. 

§101.  Approval  of  issues  of  stock,  bonds  and 
other  forms  of  indebtedness,  i.  A  telegraph  or  tele- 
phone corporation  may  when  authorized  by  order  of 
the  commission  and  not  otherwise,  issue  stock,  bonds, 
notes  or  other  evidence  of  indebtedness  payable  at 
periods  of  more  than  twelve  months  after  the  date 
thereof  when  necessary  for  the  acquisition  of  prop- 
erty, the  construction,  completion,  extension  or  im- 
provement of  its  facilities  or  the  improvement  or  main- 
tenance of  its  service  within  the  state,  or  for  the  dis- 
charge or  lawful  refunding  of  its  obligations,  or  reim- 

50— Pub.  Ut. 


786  PUBLIC  UTILITIES. 

bursement  of  moneys  actually  expended  from  the  in- 
come from  any  source,  within  five  years  next  prior  to 
the  filing  of  the  application  therefor,  or  for  any  of 
such  purposes,  provided,  however,  that  no  order  shall 
be  granted  authorizing  such  issue  for  reimbursement 
of  moneys  expended  from  income  for  betterments  or 
replacements  unless  the  applicant  shall  have  kept  its 
accounts  and  vouchers  of  such  expenditures  in  such 
manner  as  to  enable  the  commission  to  ascertain  the 
amount  of  moneys  so  expended  and  the  purposes  for 
which  such  expenditures  were  made.  The  commis- 
sion may  by  order  authorize  the  issue  of  bonds,  notes 
or  other  evidence  of  indebtedness  for  the  reimburse- 
ment of  moneys  heretofore  actually  expended  from  in- 
come for  any  of  the  purposes  herein  specified,  except 
maintenance  of  service  or  replacements  prior  to  five 
years  next  preceding  the  filing  of  the  application  there- 
for, provided  such  application  be  made  prior  to  Jan- 
uary first,  nineteen  hundred  and  twelve.  The  order 
of  the  commission  shall  fix  the  amount  of  any  such 
issue  and  the  purposes  to  which  it  or  its  proceeds  are 
to  be  applied  and  recite  that  in  the  opinion  of  the 
commission  the  money,  property  or  labor  procured  or 
to  be  procured  or  paid  for  by  such  issue  or  its  pro- 
ceeds has  been  or  is  reasonably  required  for  the  pur- 
poses specified  in  the  order,  and  that  such  purposes 
are  in  no  part  reasonably  chargeable  to  operating 
expenses  or  to  income  except  in  the  case  of  bonds, 
notes  or  other  evidence  of  indebtedness  as  may  be 
permitted  in  the  order.  For  the  purpose  of  enabling 
the  commission  to  determine  whether  it  should  issue 
such  an  order  the  commission  shall  make  such  in- 
quiry or  investigation,  hold  such  hearings  and  examine 
such  witnesses,  books,  papers,  documents  or  contracts 
as  it  may  determine  of  importance  in  enabling  it  to 
reach    a    determination.      No    such    corporation    shall, 


NEW  YORK  LAW.  787 

without  the  consent  of  the  commission,  apply  any- 
such  issue  or  its  proceeds  to  any  purpose  not  specified 
in  the  order.  Such  telegraph  corporation  or  telephone 
corporation  may  issue  notes  for  proper  corporate 
purposes  and  not  in  violation  of  any  provision  of  this 
chapter  or  of  any  other  act,  payable  at  periods  of  not 
more  than  twelve  months,  without  the  consent  of  the 
commission;  but  no  such  note  shall,  in  whole  or  in 
part,  directly  or  indirectly,  be  refunded  by  any  issue 
of  stocks  or  bonds,  or  by  any  evidence  of  indebtedness 
running  for  more  than  twelve  months,  without  the 
consent  of  the  commission.  No  telegraph  corporation 
or  telephone  corporation  shall  be  required,  however, 
to  apply  to  the  commission  for  authority  to  issue 
stocks,  bonds,  notes  or  other  evidence  of  indebtedness 
except  for  the  acquisition  of  property,  the  construction, 
completion,  extension  or  improvement  of  its  facilities, 
or  the  improvement  or  maintenance  of  its  service 
within  the  state,  or  the  discharge  or  refunding  of  obli- 
gations, or  reimbursement  of  moneys  actually  ex- 
pended for  such  purposes.  The  commission  shall  have 
no  power  to  authorize  the  capitalization  of  any  fran- 
chise or  right  to  be  a  corporation,  or  to  authorize  the 
capitalization  of  any  franchise  or  the  right  to  own, 
operate  or  enjoy  any  franchise  whatsoever  in  excess  of 
the  amount  (exclusive  of  any  tax  or  annual  charge) 
actually  paid  to  the  state  or  any  political  subdivision 
thereof,  as  the  consideration  of  the  grant  of  such 
franchise  or  right,  nor  shall  the  corporate  stock  of  the 
corporation  formed  by  the  merger  or  consolidation  of 
two  or  more  other  corporations  exceed  the  sum  of  the 
capital  stock  of  the  corporation  so  consolidated,  at 
the  par  value  thereof,  or  such  sum  and  any  additional 
sum  actually  paid  in  cash ;  nor  shall  any  contract  for 
consolidation  or  lease  be  capitalized  in  the  stock  of 
any   corporation   whatever;   nor  shall   any   corporation 


788  PUBLIC   UTILITIES. 

hereafter  issue   any  bonds  against  or  as  a  lien  upon 
any  contract  for  consolidation  or  merger. 

§  loi-a.  Reorganization.  i.  Reorganization  of 
telegraph  and  telephone  corporations  pursuant  to  sec- 
tions nine  and  ten  of  the  stock  corporation  law  and 
such  other  laws  as  may  be  enacted  from  time  to  time 
shall  be  subject  to  the  supervision  and  control  of  the 
proper  commission  and  no  such  reorganization  shall 
be  had  without  the  authorization  of  such  commission. 

2.  Upon  all  such  reorganizations  the  amount  of 
capitalization,  including  therein  all  stocks  and  bonds 
and  other  evidence  of  indebtedness,  shall  be  such  as 
is  authorized  by  the  commission,  which,  in  making  its 
determination  shall  not  exceed  the  fair  value  of  the 
property  involved,  taking  into  consideration  its  orig- 
inal cost  of  construction,  duplication  cost,  present  con- 
dition, earning  power  at  reasonable  rates  and  all  other 
relevant  matters  and  any  additional  sum  or  sums  as 
shall  be  actually  paid  in  cash,  provided,  however,  that 
the  commission  may  make  due  allowance  for  discount 
of  bonds.  Any  reorganization  agreement  before  it  be- 
comes effective  shall  be  amended  so  that  the  amount 
of  capitalization  shall  conform  to  the  amount  au- 
thorized by  the  commission. 

§  I02.  Forfeiture;  penalties.  i.  Every  telegraph 
corporation  and  every  telephone  corporation,  and  all 
ofTficers,  agents  and  employees  of  any  telegraph  cor- 
poration or  telephone  corporation  shall  obey,  observe 
and  comply  with  every  order,  direction  or  requirement 
made  by  the  commission,  under  authority  of  this  ar- 
ticle, so  long  as  the  same  shall  be  and  remain  in  force. 
Any  telegraph  corporation  or  any  telephone   corpora- 

[Added  by  ch.  289,  L.  1912.] 


NEW  YORK  LAW.  789 

tion  which  shall  violate  any  provision  of  this  article, 
or  which  fails,  omits  or  neglects  to  obey,  observe  or 
comply  with  any  order  or  any  direction  or  require- 
ment of  the  commission,  shall  forfeit  to  the  people  of 
the  state  of  New  York,  not  to  exceed  the  sum  of  one 
thousand  dollars  for  each  and  every  ofifense ;  every 
violation  of  any  such  order  or  direction  or  require- 
ment, or  of  this  article,  shall  be  a  separate  and  distinct 
ofifense,  and,  in  case  of  a  continuing  violation,  every 
day's  continuance  thereof  shall  be  and  be  deemed  to 
be  a  separate  and  distinct  offense. 

2.  An  action  to  recover  a  penalty  or  forfeiture  un- 
der this  article  may  be  brought  at  any  time  within 
one  year  after  the  cause  of  action  accrues,  in  any  court 
of  competent  jurisdiction  in  this  state,  in  the  name  of 
the  people  of  the  state  of  New  York,  on  the  relation 
of  the  commission,  and  shall  be  commenced  and  prose- 
cuted to  final  judgment  by  counsel  to  the  commission. 
In  any  such  action  all  penalties  and  forfeitures  incurred 
up  to  the  time  of  commencing  the  same  may  be  sued 
for  and  recovered  therein,  and  the  commencement  of 
an  action  to  recover  a  penalty  or  forfeiture  shall  not 
be,  or  be  held  to  be,  a  waiver  of  the  right  to  recover 
any  other  penalty  or  forfeiture;  if  the  defendant  in 
such  action  shall  prove  that  during  any  portion  of  the 
time  for  which  it  is  sought  to  recover  penalties  or 
forfeitures  for  a  violation  of  an  order  of  the  commis- 
sion, the  defendant  was  actually  and  in  good  faith 
prosecuting  a  suit,  action  or  proceeding  in  the  courts 
to  set  aside  such  order,  the  court  shall  remit  the  pen- 
alties or  forfeitures  incurred  during  the  pendency  of 
such  suit,  action  or  proceeding.  All  moneys  recovered 
in  any  such  action,  together  with  the  costs  thereof, 
shall  be  paid  into  the  state  treasury  to  the  credit  of 
the  general  fund. 


790  PUBLIC  UTILITIES. 

§  103.  Summary  proceedings.  Whenever  the  com- 
mission shall  be  of  the  opinion  that  a  telegraph  cor- 
poration or  telephone  corporation  subject  to  its  super- 
vision is  failing  or  omitting  or  about  to  fail  or  omit  to 
do  anything  required  of  it  by  law^  or  by  order,  direct- 
tion  or  requirement  of  the  commission  authorized  by 
this  chapter,  or  is  doing  anything  or  about  to  do  any- 
thing or  permitting  anything  or  about  to  permit  any- 
thing to  be  done,  contrary  to  or  in  violation  of  law, 
or  of  any  order,  direction  or  requirement  of  the  com- 
mission authorized  by  this  chapter,  it  shall  direct 
counsel  to  the  commission  to  commence  an  action  or 
proceeding  in  the  supreme  court  of  the  state  of  New 
York  in  the  name  of  the  people  of  the  state  of  New 
York  on  the  relation  of  the  commission  for  the  purpose 
of  having  such  violation  or  threatened  violations  stop- 
ped and  prevented,  either  by  mandamus  or  injunction. 
Counsel  to  the  commission  shall  thereupon  begin  such 
action  or  proceeding  by  a  petition  to  the  supreme 
court  alleging  the  violation  complained  of  and  praying 
for  appropriate  relief  by  way  of  mandamus  or  injunc- 
tion. It  shall  thereupon  be  the  duty  of  the  court  to 
specify  the  time,  not  exceeding  twenty  days  after 
service  of  a  copy  of  the  petition,  within  which  the 
telegraph  corporation  or  telephone  corporation  com- 
plained of  must  answer  the  petition.  In  case  of  default 
in  answer  or  after  answer,  the  court  shall  immediately 
inquire  into  the  facts  and  circumstances  in  such  man- 
ner as  the  court  shall  direct  without  other  or  formal 
pleadings,  and  without  respect  to  any  technical  re- 
quirement. Such  other  persons  or  corporations  as  the 
court  shall  deem  necessary  or  proper  to  join  as  parties 
in  order  to  make  its  order,  judgment  or  writs  effective 
may  be  joined  as  parties.  The  final  judgment  in  any 
such    action    or    proceeding    shall    either    dismiss    the 


NEW  YORK  LAW. 


791 


action  or  proceeding  or  direct  that  a  writ  of  mandamus 
or  an  injunction,  or  both,  issue  as  prayed  for  in  the 
petition  or  in  such  modified  or  other  form  as  the  court 
may  determine  will  afford  appropriate  relief. 


792  PUBLIC  UTILITIES. 


ARTICLE  VI. 

Commissions   and   Offices  Abolished;   Saving   Clause; 
Repeal. 

Section  120.  Board  of  Railroad  Commissioners  abolished;  effect  there- 
of. 

121.  Commission    of   gas    and    electricity    abolished;    effect 

thereof. 

122.  Inspector  of  gas  meters  abolished;  effect  thereof. 

123.  Board      of      rapid      transit      railroad      commissioners 

abolished;  effect  thereof, 
effect  thereof. 

124.  Transfer  of  records. 

125.  Pending  actions  and  proceedings. 

126.  Construction. 

127.  Repeal. 

§  I20.  Board  of  railroad  commissioners  abolished; 
effect  thereof.  On  and  after  July  first,  nineteen  hun- 
dred and  seven,  the  board  of  railroad  commissioners 
shall  be  abolished.  All  the  powers  and  duties  of  such 
board  conferred  and  imposed  by  any  statute  of  this 
state  shall  thereupon  be  exercised  and  performed  by 
the  public  service  commissions. 

§  121.  Commission  of  gas  and  electricity  abol- 
ished; effect  thereof.  On  and  after  July  first,  nineteen 
hundred  and  seven,  the  commission  of  gas  and  elec- 
tricity shall  be  abolished.  All  the  powers  and  duties 
of  such  commission  conferred  and  imposed  by  any 
statute  of  this  state  shall  be  exercised  and  performed 
by  the  public  service  commissions. 

§  122.  Inspector  of  gas  meters  abolished;  effect 
thereof.  On  and  after  July  first,  nineteen  hundred 
and  seven,  the  offices  of  inspector  and  deputy  inspec- 


•     7 

1 


NEW  YORK  LAW.  793 

tors  of  gas  meters  shall  be  abolished.  All  the  powers 
and  duties  of  such  inspector  conferred  and  imposed 
by  any  statute  of  this  state  shall  be  exercised  and  per- 
formed by  the  public  service  commission.  But  any 
meter  inspected,  proved  and  sealed,  by  the  said  in- 
spector of  gas  meters,  prior  to  July  first,  nineteen 
hundred  and  seven,  shall  be  deemed  to  have  been  in- 
spected by  the  commission. 

§  123.  Board  of  rapid  transit  railroad  commission- 
ers aboHshed;  effect  thereof.  On  and  after  July  first, 
nineteen  hundred  and  seven,  the  board  of  rapid  transit 
railroad  commissioners  shall  be  abolished.  All  the 
powers  and  duties  of  such  board  conferred  and  im- 
posed by  any  statute  of  this  state  shall  thereupon  be 
exercised  and  performed  by  the  public  service  com- 
mission of  the  first  district. 

§  124.  Transfer  of  records,  i.  The  board  of 
railroad  commissioners,  the  commission  of  gas  and 
electricity,  and  the  inspector  of  gas  meters,  shall  trans- 
fer and  deliver  to  the  public  service  commission  of  the 
second  district  all  books,  maps,  papers  and  records  of 
whatever  description,  in  their  possession  on  July 
first,  nineteen  hundred  and  seven;  and  the  said  com- 
mission is  authorized  to  take  possession  of  all  such 
books,  maps,  papers  and  records. 

2.  The  board  of  rapid  transit  railroad  commis- 
sioners shall  transfer  and  deliver  to  the  public  service 
commission  of  the  first  district  all  contracts,  books, 
maps,  plans,  papers  and  records  of  whatever  descrip- 
tion, in  their  possession  on  July  first,  nineteen  hun- 
dred and  seven;  and  the  said  commission  is  authorized 
to  take  possession  of  all  such  contracts,  books,  maps, 
plans,  papers  and  records.  The  said  commission  may 
also,  at  its  pleasure,  retain  in  its  employment  any  per- 


794  PUBLIC   UTILITIES. 

son  or  persons  then  employed  by  the  said  board  of 
rapid  transit  railroad  commissioners,  and  all  said  per- 
sons shall  be  eligible  for  transfer  and  appointment  to 
positions  under  the  public  service  commission  of  the 
first  district. 

3.  The  public  service  commission  of  the  second 
district  may  transfer  to  the  public  service  commission 
of  the  first  district  any  of  the  said  books,  maps,  papers 
and  records  which  relate  to  any  corporation,  person  or 
matter  vs^ithin  the  jurisdiction  of  the  public  service 
commission  of  the  first  district. 

§  125.  Pending  actions  and  proceedings.  This 
chapter  shall  not  affect  pending  actions  or  proceedings, 
civil  or  criminal,  brought  by  or  against  the  board  of 
railroad  commissioners  or  the  commission  of  gas  and 
electricity,  or  the  board  of  rapid  transit  railroad  com- 
missioners, but  the  same  may  be  prosecuted  or  de- 
fended in  the  name  of  the  public  service  commission, 
provided  the  subject-matter  thereof  is  within  the 
statutory  jurisdiction  of  such  commission.  Any  inves- 
tigation, examination  or  proceeding  undertaken,  com- 
menced or  instituted  by  the  said  boards  or  commission 
or  either  of  them  prior  to  July  first,  nineteen  hundred 
and  seven,  may  be  conducted  and  continued  to  a  final 
determination  by  the  proper  public  service  commis- 
sion in  the  same  manner,  under  the  same  terms  and 
conditions,  and  with  the  same  effect  as  though  such 
boards  or  commission  had  not  been  abolished. 

§  126.  Construction.  Wherever  the  terms  board 
of  railroad  commissioners,  or  commission  of  gas  and 
electricity  or  inspector  of  gas  meters  or  board  of  rapid 
transit  railroad  commissioners  occur  in  any  law,  con- 
tract or  document  or  whenever  in  any  law,  contract 
or  document  reference  is  made  to  such  boards,  com- 


NEW  YORK  LAW.  795 

mission  or  inspector,  such  terms  or  reference  shall  be 
deemed  to  refer  to  and  include  the  public  service  com- 
missions as  established  by  this  chapter,  so  far  as  such 
law,  contract  or  document  pertains  to  matters  which 
are  within  the  jurisdiction  of  the  said  public  service 
commissions. 

§  127.  Repeal.  Of  the  laws  enumerated  in  the 
schedule  hereto  annexed,  that  portion  specified  in  the 
last  column  is  hereby  repealed.  All  other  acts  and 
parts  of  acts  otherwise  in  conflict  with  this  act  are 
hereby  repealed. 


796  PUBLIC   UTILITIES. 


APPENDIX  B. 

PUBLIC  UTILITIES  LAW  OF  WISCONSIN. 

Sections    1797m — i    to    1797m — 109. 

Public  Utilities  Law;  definition;  public  utility.  Sec- 
tion 1797m — I.  I.  The  term  "public  utility"  as  used 
in  this  act  shall  mean  and  embrace  every  corporation, 
company,  individual,  association  of  individuals,  their 
lessees,  trustees,  or  receivers  appointed  by  any  court 
whatsoever,  and  every  town,  village,  or  city  that  now 
or  hereafter  may  own,  operate,  manage,  or  control 
any  plant  or  equipment  or  any  part  of  a  plant  or  equip- 
ment within  the  state,  for  the  conveyance  of  telephone 
messages  or  for  the  production,  transmission,  deliv- 
ery, or  furnishing  of  heat,  light,  water,  or  power 
either  directly  or  indirectly  to  or  for  the  public, 
or  that  now  or  hereafter  may  own,  operate,  manage,  or 
control  any  toll  bridge  wJiolly  within  the  state. 
Ch.  499,   1907;  ch.  48,   1911. 

Municipal  council.  2.  The  term  "municipal  coun- 
cil" as  used  in  this  act  shall  mean  and  embrace  the 
common  council,  the  board  of  aldermen,  the  board  of 
trustees,  the  town  or  village  board,  or  any  other 
governing  body  of  any  town,  village  or  city  wherein 
the  property  of  the  public  utility  or  any  part  thereof 
is  located. 

Municipality.  3.  The  term  "municipality"  as 
used  in  this  act  shall  mean  any  town,  village  or  city 

Parts  in  italics  are  amendments  of  1911. 


WISCONSIN  LAW.  797 

wherein  property  of  a  public  utility  or  any  part  thereof 
is  located. 

Service.  4.  The  term  ''service"  is  used  in  this 
act  in  its  broadest  and  most  inclusive  sense. 

Indeterminate  permit.  5.  The  term  "indetermi- 
nate permit"  as  used  in  this  act  shall  mean  and  em- 
brace every  grant,  directly  or  indirectly  from  the 
state,  to  any  corporation,  company,  individual,  asso- 
ciation of  individuals,  their  lessees,  trustees  or  receiv- 
ers appointed  by  any  court  whatsoever,  of  power, 
right  or  privilege  to  own,  operate,  manage  or  control 
any  plant  or  equipment  or  any  part  of  the  plant  or 
equipment  within  this  state  for  the  production,  trans- 
mission, delivery  or  furnishing  of  heat,  light,  water 
or  power,  either  directly  or  indirectly,  to  or  for  the 
public,  which  shall  continue  in  force  until  such  time 
as  the  municipality  shall  exercise  its  option  to  pur- 
chase as  provided  in  this  act  or  until  it  shall  be  other- 
wise terminated  according  to  law. 

Commission.  6.  The  term  "commission"  as  used 
in  this  act  shall  mean  the  railroad  commission  of  Wis- 
consin. 

Ch.  499,  1907. 

Railroad  commission's  powers.  Section  1797m — 2. 
The  railroad  commission  of  Wisconsin  is  vested  with 
power  and  jurisdiction  to  supervise  and  regulate  every 
public  utility  in  this  state  and  to  do  all  things  neces- 
sary and  convenient  in  the  exercise  of  such  power 
and  jurisdiction. 

Ch.  499,  1907. 

Utility  charges  to  be  reasonable  and  just.  Sec- 
tion 1797m — 3.  Every  public  utility  is  required  to 
furnish  reasonably  adequate  service  and  facilities.    The 


798  PUBLIC  UTILITIES. 

charge  made  by  any  public  utility  for  any  heat,  light, 
water  or  power  produced,  transmitted,  delivered  or 
furnished  or  any  telephone  message  conveyed  or 
for  any  service  rendered  or  to  be  rendered  in  connec- 
tion therewith  shall  be  reasonable  and  just,  and  every 
unjust  or  unreasonable  charge  for  such  service  is  pro- 
hibited and  declared  unlawful. 
Ch.  499,  1907. 

Facilities  to  be  granted  other  utilities;  physical 
connection  between  telephone  lines;  petition  to  com- 
mission. Section  1797m — 4.  i.  Every  public  utility, 
and  every  person,  association  or  corporation  having 
conduits,  subways,  poles  or  other  equipment  on,  over 
or  under  any  street  or  highway,  shall  for  a  reasonable 
compensation,  permit  the  use  of  the  same  by  any 
public  utility,  whenever  public  convenience  and  neces- 
sity require  such  use,  and  such  use  will  not  result  in 
irreparable  injury  to  the  owner  or  other  users  of  such 
equipment,  nor  in  any  substantial  detriment  to  the 
service  to  be  rendered  by  such  owners  or  other  users, 
and  every  utility  for  the  conveyance  of  telephone  messages 
shall  permit  a  physical  connection  or  connections  to  he  made, 
and  telephone  service  to  he  furnished  hetween  any  telephone 
system  operated  hy  it,  and  the  telephone  toll  line  operated 
hy  another  such  public  utility,  or  hetween  its  toll  line  and 
the  telephone  system  of  another  such  pvhlic  utility,  or 
hetween  its  toll  line  and  the  toll  line  of  another  such  public 
utility,  or  hetween  its  telephone  system  and  the  telephone 
system  of  another  such  public  utility,  whenever  public 
convenience  and  necessity  require  such  physical  connection 
or  connections,  and  such  physical  connection  or  connections 
will  not  result  in  irreparable  injury  to  the  owners 
or  other  users  of  the  facilities  of  such  public  utilities, 
nor  in  any  substantial  detriment  to  the  service  to  be 
rendered    hy  su^h   public    utilities.      The    term    "physical 


WISCONSIN  LAW.  799 

connection,"  as  used  in  this  section,  shall  mean  such  number 
of  trunk  lines  or  complete  wire  circuits  and  connections  as 
may  be  required  to  furnish  reasonably  adequate  telephone 
service  between  such  public  utilities. 

2.  In  case  of  failure  to  agree  upon  such  use  or  the 
condition  or  compensation  for  such  use,  or  in  case  of 
failure  to  agree  upon  such  physical  connection  or  connec- 
tions, or  the  terms  and  conditions  upon  which  the  same  shall 
be  made,  any  pubHc  utiHty  or  any  person,  association 
or  corporations  interested  may  apply  to  the  commis- 
sion, and  if  after  investigation  the  commission  shall 
ascertain  that  public  convenience  and  necessity  require 
such  use  or  such  physical  connection  or  connections,  and 
that  *  *  *  such  use  or  such  physical  connection  or 
connections  would  not  result  in  irreparable  injury  to 
the  owner  or  other  users  of  such  equipment  or  of  the 
facilities  of  such  public  utilities,  nor  in  any  substantial 
detriment  to  the  service  to  be  rendered  by  such  owner 
or  such  public  utilities  or  other  users  of  such  equipment 
or  facilities,  it  shall  by  order  direct  that  such  use  be 
permitted  and  prescribe  reasonable  conditions  and 
compensation  for  such  joint  use,  and  that  such  physical 
connection  or  connections  be  made,  and  determine  how  and 
within  what  time  such  connection  or  connections  shall  be 
made,  and  by  whom  the  expense  of  making  and  maintaining 
such  connection  or  connections  shall  be  paid. 

3.  Such  use  so  ordered  shall  be  permitted  and  such 
physical  connection  or  connections  so  ordered  shall  be  made, 
and  such  conditions  and  compensation  so  prescribed 
for  such  use  and  such  terms  and  conditions,  upon  which 
such  physical  connection  or  connections  shall  be  made,  so 
determined,  shall  be  the  lawful  conditions  and  com- 
pensation for  such  use,  and  the  lawful  terms  and  conditions 
upon  which  such  physical  connection  or  connections  shall  be 
made,  to  be  observed,  followed  and  paid,  subject  to 
recourse  to  the  courts  upon  the  complaint  of  any  in- 


800  PUBLIC   UTILITIES. 

terested  party,  as  provided  in  sections  i797ni — 64  to 
1797m — 73,  inclusive,  and  such  section  so  far  as  ap- 
plicable shall  apply  to  any  action  arising  on  such 
complaint  so  made.  Any  such  order  of  the  commis- 
sion may  be  from  time  to  time  revised  by  the  commis- 
sion upon  application  of  any  interested  party  or  upon 
its  own  motion. 

Ch.  499,  1907;  ch.  546,  191 1. 

Utility  property;  valuation.  Section  1797m — 5. 
The  commission  shall  value  all  the  property  of  every 
public  utility  actually  used  and  useful  for  the  con- 
venience of  the  public.  In  making  such  valuation  the 
commission  may  avail  itself  of  any  information  in 
possession  of  the  state  board  of  assessment. 
Ch.  499,  1907. 

Valuation;  commission's  hearing  and  report.  Sec- 
tion 1797m — 6.  I.  Before  final  determination  of  such 
value  the  commission  shall,  after  notice  to  the  public 
utility,  hold  a  public  hearing  as  to  such  valuation  in 
the  manner  prescribed  for  hearing  in  sections  1797m — 
45  to  1797m — 55  inclusive,  and  the  provisions  of  such 
sections  so  far  as  applicable  shall  apply  to  such  hear- 
ing. 

2.  The  commission  shall  within  five  days  after 
such  valuation  is  determined  serve  a  statement  thereof 
upon  the  public  utility  interested,  and  shall  file  a  like 
statement  with  the  clerk  of  every  municipality  in  which 
any  part  of  the  plant  or  equipment  of  such  public 
utility  is  located. 

€h.  499,  1907. 

Re-valuation.     Section      1797m — 7.     The     commis- 
sion may  at  any  time  on  its  own  initiative  make  a  re- 
valuation of  such  property. 
Ch.  499,  1907. 


WISCONSIN  LAW.  8oi 

Uniform  accounting  by  utilities;  other  business 
separate.  Section  1797m — 8.  i.  Every  public  utility 
shall  keep  and  render  to  the  commission  in  the  man- 
ner and  form  prescribed  by  the  commission  uniform 
accounts  of  all  business  transacted. 

2.  Every  public  utility  engaged  directly  or  indi- 
rectly in  any  other  business  than  that  of  production, 
transmission  or  furnishing  of  heat,  light,  water  or 
power  or  the  conveyance  of  telephone  messages  shall, 
if  required  by  the  commission,  keep  and  render  sepa- 
rately to  the  -commission  in  like  manner  and  form  the 
accounts  of  all  such  other  business,  in  which  case  all 
the  provisions  of  this  act  shall  apply  with  like  force 
and  effect  to  the  books,  accounts,  papers  and  records 
of  such  other  business. 
Ch.  499,  1907. 

Forms  of  book-keeping;  prescription.  Section 
1797m — 9.  The  commission  shall  prescribe  the  forms 
of  all  books,  accounts,  papers  and  records  required  to 
be  kept,  and  every  public  utility  is  required  to  keep 
and  render  its  books,  accounts,  papers  and  records 
accurately  and  faithfully  in  the  manner  and  form  pre- 
scribed by  the  commission  and  to  comply  with  all 
directions  of  the  commission  relating  to  such  books, 
accounts,  papers  and  records. 
Ch.  499,  1907. 

Blanks.      Section      1797m — 10.      The      commission 
shall  cause  to  be  prepared  suitable  blanks  for  carrying 
out  the  purposes  of  this  act,  and  shall,  when  necessary, 
furnish  such  blanks  to  each  public  utility. 
Ch.  499,  1907. 

No   other  books.     Section    1797m — 11.     No   public 
utility  shall  keep  any  other  books,  accounts,  papers  or 
61— Pub.  Ut 


802  PUBLIC   UTILITIES. 

records    of    the    business    transacted    than    those    pre- 
scribed or  approved  by  the  commission. 
Ch.  499,  1907. 

Office;  records;  removal  from  state.  Section 
1797m — 12.  Each  pubhc  utiUty  shall  have  an  office  in 
one  of  the  tow^ns,  villages  or  cities  in  this  state  in 
which  its  property  or  some  part  thereof  is  located,  and 
shall  keep  in  said  office  all  such  books,  accounts,  papers 
and  records  as  shall  be  required  by  the  commission 
to  be  kept  within  the  state.  No  books,  accounts, 
papers  or  records  required  by  the  commission  to  be 
kept  within  the  state  shall  be  at  any  time  removed 
from  the  state,  except  upon  such  conditions  as  may 
be  prescribed  by  the  commission. 
Ch.  499,  1907. 

Annual  balance  sheet;  filing.  Section  1797m — 13. 
The  account  shall  be  closed  annually  on  the  30th  day 
of  June  and  a  balance  sheet  of  that  date  promptly 
taken  therefrom.  On  or  before  the  first  day  of  August 
following,  such  balance  sheet  together  with  such  other 
information  as  the  commission  shall  prescribe,  verified 
by  an  officer  of  the  public  utihty,  shall  be  filed  with 
the  commission. 

Ch.  499,  1907. 

Audit  and  inspection.  Section  1797m — 14.  i. 
The  commission  shall  provide  for  the  examination  and 
audit  of  all  accounts,  and  all  items  shall  be  allocated  to 
the  accounts  in  the  manner  prescribed  by  the  commis- 
sion. 

2.  The  agents,  accountants  or  examiners  employed 
by  the  commission  shall  have  authority  under  the 
direction   of   the   commission   to   inspect   and   examine 


WISCONSIN  LAW.  803 

any  and  all  books,  accounts,  papers,  records  and  memo- 
randa kept  by  such  public  utilities. 
Ch.  499,  1907. 

Depreciation  accounts;  rates;  funds;  rules.  Sec- 
tion 1797m — 15.  I.  Every  public  utility  shall  carry 
a  proper  and  adequate  depreciation  account  whenever 
the  commission  after  investigation  shall  determine 
that  such  depreciation  account  can  be  reasonably  re- 
quired. The  commission  shall  ascertain  and  determine 
what  are  the  proper  and  adequate  rates  of  depreciation 
of  the  several  classes  of  property  of  each  public  utility. 
The  rates  shall  be  such  as  will  provide  the  amounts 
required  over  and  above  the  expense  of  maintenance, 
to  keep  such  property  in  a  state  of  efficiency  corre- 
sponding to  the  progress  of  the  industry.  Each  public 
utility  shall  conform  its  depreciation  accounts  to  such 
rates  so  ascertained  and  determined  by  the  commis- 
sion. The  commission  may  make  changes  in  such 
rates  of  depreciation  from  time  to  time  as  it  may  find 
to  be  necessary. 

2.  The  commission  shall  also  prescribe  rules, 
regulations,  and  forms  of  accounts  regarding  such 
depreciation  which  the  public  utility  is  required  to 
carry  into  effect. 

3.  The  commission  shall  provide  for  such  depre- 
ciation in  fixing  the  rates,  tolls  and  charges  to  be  paid 
by  the  public. 

4.  All  moneys  thus  provided  for  shall  be  set  aside 
out  of  the  earnings  and  carried  in  a  depreciation  fund. 
The  moneys  in  this  fund  may  be  expended  in  new 
constructions,  extensions  or  additions  to  the  property 
of  such  public  utility,  or  invested,  and  if  invested  the 
income  from  the  investments  shall  also  be  carried  in 
the    depreciation    fund.      This    fund    and    the    proceeds 


804  PUBLIC   UTILITIES. 

thereof   shall   be    used   for   no    other   purpose    than    as 
provided  in  this  section  and  for  depreciation. 
Ch.  499,  1907. 

New  constructions;  accounting.  Section  1797m — 
16.  The  commission  shall  keep  itself  informed  of  all 
new  construction,  extensions  and  additions  to  the 
property  of  such  pubhc  utilities  and  shall  prescribe 
the  necessary  forms,  regulations  and  instructions  to 
the  officers  and  employees  of  such  public  utilities  for 
the  keeping  of  construction  accounts,  which  shall 
clearly  distinguish  all  operating  expenses  and  new  con- 
struction. 

Ch.  499,  1907. 

Profit-sharing  and  sliding  scales;  commission's  ap- 
proval. Section  1797m — 17.  i.  Nothing  in  this  act 
shall  be  taken  to  prohibit  a  public  utiHty  from  enter- 
ing into  any  reasonable  arrangement  with  its  custom- 
ers or  consumers  or  with  its  employees,  for  the  division 
or  distribution  of  its  surplus  profits,  or  providing  for 
a  sliding  scale  of  charges,  or,  other  financial  device 
that  may  be  practicable  and  advantageous  to  the 
parties  interested.  No  such  arrangement  or  device 
shall  be  lawful  until  it  shall  be  found  by  the  commis- 
sion, after  investigation,  to  be  reasonable  and  just  and 
not  inconsistent  with  the  purposes  of  this  act.  Such 
arrangement  shall  be  under  the  supervision  and  regu- 
lation of  the  commission. 

2.  The  commission  shall  ascertain,  determine  and 
order  such  rates,  charges  and  regulations  as  may  be 
necessary  to  give  effect  to  such  arrangement,  but  the 
right  and  power  to  make  such  other  and  further 
changes  in  rates,  charges  and  regulations  as  the  com- 
mission may  ascertain  and  determine  to  be  necessary 
and  reasonable  and  the  right  to  revoke  its  approval 
and    amend    or   rescind   all   orders   relative   thereto   is 


WISCONSIN  LAW.  805 

reserved  and  vested  in  the  commission  notwithstand- 
ing any  such  arrangement  and  mutual  agreement. 
Ch.  499,  1907. 

Report  by  utilities;  items.  Section  1797m — 18. 
Each  public  utility  shall  furnish  to  the  commission  in 
such  form  and  at  such  times  as  the  commission  shall 
require,  such  accounts,  reports  and  information  as 
shall  show  in  itemized  detail:  (i)  the  depreciation 
per  unit,  (2)  the  salaries  and  wages  separately  per 
unit,  (3)  legal  expenses  per  unit,  (4)  taxes  and  rentals 
separately  per  unit,  (5)  the  quantity  and  value  of 
material  used  per  unit,  (6)  the  receipts  from  residuals, 
by-products,  services  or  other  sales  separately  per 
unit,  (7)  the  total  and  net  cost  per  unit,  (8)  the  gross 
and  net  profit  per  unit,  (9)  the  dividends  and  interest 
per  unit,  (10)  surplus  or  reserve  per  unit,  (11)  the 
prices  per  unit  paid  by  consumers;  and  in  addition 
such  other  items,  v^hether  of  a  nature  similar  to  those 
hereinbefore  enumerated  or  otherwise,  as  the  commis- 
sion may  prescribe  in  order  to  show  completely  and 
in  detail  the  entire  operation  of  the  public  utility  in 
furnishing  the  unit  of  its  product  or  service  to  the 
public. 

Ch.  499,  1907. 

Commission's  reports,  annual  and  other;  values 
shown.  Section  1797m — 19.  i.  The  commission 
shall  publish  annual  reports  showing  its  proceedings 
and  showing  in  tabular  form  the  details  per  unit  as 
provided  in  section  1797m — 18  for  all  the  public  utili- 
ties of  each  kind  in  the  state,  and  such  monthly  or 
occasional  report,  as  it  may  deem  advisable. 

2.  The  commission  shall  also  publish  in  its  annual 
reports  the  value  of  all  the  property  actually  used  and 
useful  for  the  convenience  of  the  public  and  the  value 
of  the  physical   property   actually  used   and   useful   for 


8o6  PUBLIC  UTILITIES. 

the  convenience  of  the  public,  of  every  pubHc  utility 
as  to  w^hose  rates,  charges,  service  or  regulations  and 
hearing  has  been  held  by  the  commission  under  section 
1797m — 45  and  1797m — 46  or  the  value  of  whose  prop- 
erty has  been  ascertained  by  it  under   section   1797m 

— 5- 

Ch.  499,  1907. 

Commission's  records  public.  Section  1797m — 20. 
All  facts  and  information  in  the  possession  of  the  com- 
mission shall  be  public  and  all  reports,  records,  files, 
books,  accounts,  papers  and  memoranda  of  every  na- 
ture w^hatsoever  in  their  possession  shall  be  open  to 
inspection  by  the  public  at  all  reasonable  times  except 
as  provided  in  section  1797m — 21. 
€h.  499,  1907. 

Temporary  secrecy.  Section  1797m — 21.  i. 
Whenever  the  commission  shall  determine  it  to  be 
necessary  in  the  interest  of  the  public  to  w^ithhold 
from  the  public  any  facts  or  information  in  its  posses- 
sion, such  facts  may  be  withheld  for  such  period  after 
the  acquisition  thereof  not  exceeding  ninety  days  as 
the  commission  may  determine. 

2.     No   facts   or   information   shall   be   withheld   by 
the   commission   from   the   public   for   a   longer   period 
than  ninety  days   nor  be   so  withheld  for  any   reason 
whatsoever  other  than  in  the  interest  of  the  public. 
Ch.  499,   1907. 

Units  of  product  or  service.  Section  1797m — 22. 
The  commission  shall  ascertain  and  prescribe  for  each 
kind  of  public  utility  suitable  and  convenient  standard 
commercial  units  of  product  or  service.  These  shall 
be  lawful  units  for  the  purposes  of  this  act. 
Ch.  499,  1907. 


WISCONSIN  LAW.  807 

Standard  measurements;  accurate  appliances.  Sec- 
tion 1797m — 23.  I.  The  commission  shall  ascertain 
and  fix  adequate  and  servicable  standards  for  the 
measurement  of  quality,  pressure,  initial  voltage  or 
other  condition  pertaining  to  the  supply  of  the  prod- 
uct or  service  rendered  by  any  public  utility  and  pre- 
scribe reasonable  regulations  for  examination  and 
testing  of  such  product  or  service  and  for  the  measure- 
ment thereof. 

2.  It  shall  establish  reasonable  rules,  regulations, 
specifications  and  standards  to  secure  the  accuracy  of 
all  meters  and  appliances  for  measurements,  and  every 
public  utility  is  required  to  carry  into  effect  all  orders 
issued  by  the  commission  relative  thereto. 

3.  Nothing  contained  in  this  section  shall  limit 
in  any  manner  any  powers  or  authority  vested  in  mu- 
nicipal corporations  as  provided  in  section  1797m — 87. 

Ch.  499,   1907. 

Measuring  instruments;  testing;  fees.  Section 
1797m — 24.  I.  The  commission  shall  provide  for  the 
examination  and  testing  of  any  and  all  appliances  used 
for  the  measuring  of  any  product  or  service  of  a  public 
utility. 

2.  Any  consumer  or  user  may  have  any  such 
appliance  tested  upon  payment  of  the  fees  fixed  by 
the  commission. 

3.  The  commission  shall  declare  and  establish 
reasonable  fees  to  be  paid  for  testing  such  appliances 
on  the  request  of  the  consumers  or  users,  the  fee  to 
be  paid  by  the  consumer  or  user  at  the  time  of  his 
request,  but  to  be  paid  by  the  public  utility  and  repaid 
to  the  consumer  or  user  if  the  appliance  be  found 
defective  or  incorrect  to  the  disadvantage  of  the  con- 
sumer or  user. 

Ch.  499,  1907. 


8o8  PUBLIC  UTILITIES. 

Public    equipment    for    tests.     Section    1797m — 25 
The  commission  may  purchase   such  materials,   appa- 
ratus   and    standard    measuring    instruments    for    such 
examinations  and  tests  as  it  may  deem  necessary. 
Ch.  499,  1907. 

Entry  upon  premises.  Section  1797m — 26.  The 
commission,  its  agents,  experts  or  examiners,  shall 
have  power  to  enter  upon  any  premises  occupied  by 
any  public  utility  for  the  purpose  of  making  the  ex- 
aminations and  tests  provided  in  this  act  and  to  set 
up  and  use  on  such  premises  any  apparatus  and  appli- 
ances and  occupy  reasonable  space  therefor, 
Ch.  499,  1907. 

Rate  schedules;  publicity.  Section  1797m — 27.  Ev- 
ery public  utility  shall  file  with  the  commission  within 
the  time  to  be  fixed  by  the  commission,  schedules  which 
shall  be  open  to  public  inspection,  showing  all  rates, 
tolls  and  charges  which  it  has  established  and  which 
are  in  force  at  the  time  for  any  service  performed  by 
it  within  the  state,  or  for  any  service  in  connection 
therewith  or  performed  by  any  public  utility  con- 
trolled or  operated  by  it.  The  rates,  tolls  and  charges 
shown  on  such  schedules  shall  not  exceed  the  rates, 
tolls  and  charges  in  force  April  i,  1907. 
Ch.  499,  1907. 

Rules  and  regulations;  publicity.  Section  1797m — 
28.  Every  public  utility  shall  file  with  and  as  a  part 
of  such  schedule  all  rules  and  regulations  that  in  any 
manner  afifect  the  rates  charged  or  to  be  charged  for 
any  service. 

Ch.  499,  1907. 

Files  accessible  to  public.  Section  1797m — 29. 
A  copy  of  so  much  of  said  schedules  as  the  commission 
shall  deem   necessary  for  the   use   of  the   public   shall 


WISCONSIN  LAW.  809 

be  printed  in  plain  type,  and  kept  on  file  in  every 
station  or  office  of  such  public  utility  where  payments 
are  made  by  the  consumers  or  users,  open  to  the  pub- 
lic, in  such  form  and  place  as  to  be  readily  accessible 
to  the  public  and  as  can  be  conveniently  inspected. 
Ch.  499,  1907. 

Joint  rates;  publicity.  Section  1797m — 30.  i. 
Where  a  schedule  of  joint  rates  or  charge  is  or  may 
be  in  force  between  two  or  more  public  utilities,  such 
schedules  shall  in  like  manner  be  printed  and  filed 
with  the  commission,  and  so  much  thereof  as  the  com- 
mission shall  deem  necessary  for  the  use  of  the  public, 
shall  be  filed  in  every  such  station  or  office  as  pro- 
vided in  section  1797m — 29. 

2.  Whenever  two  or  more  'public  utilities  for  the  con- 
veyance of  telephone  messages  are  engaged  in  furnishing 
joint  telephone  service  to  the  public,  or  shall  be  required  to 
furnish  such  service  as  provided  in  section  1797m — Jf,  and 
shall  refuse  or  neglect  to  establish  joint  toll  or  tolls,  the 
commission  may  after  notice  and  a  public  hearing,  as  pro- 
vided in  sections  17977)1 — j^Jf  and  1797m — Ji.5,  fix  and  estab- 
lish, by  order,  such  joint  toll  or  tolls,  and  if  the  public  utili- 
ties party  thereto  shall  fail  to  agree  upon  the  apportionment 
thereof  within  twenty  days  after  the  service  of  such  order, 
the  commission  may,  upon  a  like  hearing,  issue  a  supple- 
mental order  declaring  the  apportionment  of  such  joint  toll 
or  tolls,  and  the  same  shall  take  effect  of  its  own  force  as 
part  of  the  original  order. 

Ch.  499,  1907;  ch.  546,  191 1. 

Changes  of  rates;  ten  days'  notice.  Section  1797m 
— 31.  No  change  shall  thereafter  be  made  in  any 
schedule,  including  schedules  of  joint  rates,  except 
upon  ten  days'  notice  to  the  commission,  and  all  such 
changes  shall  be  plainly  indicated  upon  existing  sched- 
ules,   or   by    filing   new    schedules    in    lieu    thereof    ten 


8lO  PUBLIC   UTILITIES. 

days   prior   to   the   time   the   same   are   to   take   effect; 
provided,    that    the    commission,    upon    application    of 
any   public   utility,    may   prescribe    a    less    time    within 
which  a  reduction  may  be  made. 
Ch.  499,  1907. 

Revised  schedules;  publicity.  Section  1797m — 32, 
Copies  of  all  new  schedules  shall  be  filed  as  herein- 
before provided  in  every  station  and  office  of  such 
public  utility  where  payments  are  made  by  consumers 
or  users  ten  days  prior  to  the  time  the  same  are  to 
take  effect,  unless  the  commission  shall  prescribe  a 
less  time. 

Ch.  499,  1907. 

Unlawful  rates.  Section  1797m — 33.  It  shall  be 
unlawful  for  any  public  utility  to  charge,  demand,  col- 
lect or  receive  a  greater  or  less  compensation  for  any 
service  performed  by  it  within  the  state  or  for  any 
service  in  connection  therewith  than  is  specified  in 
such  printed  schedules,  including  schedules  of  joint 
rates,  as  may  at  the  time  be  in  force,  or  to  demand^ 
collect  or  receive  any  rate,  toll  or  charge  not  specified 
in  such  schedule.  The  rates,  tolls  and  charges  named 
therein  shall  be  the  lawful  rates,  tolls  and  charges 
until  the  same  are  changed  as  provided  in  this  act. 
Ch.  499,  1907. 

Schedules;   forms  prescribed.     Section    1797m — 34. 
The   commission   may   prescribe   such    changes   in   the 
form  in  which  the  schedules  are  issued  by  any  public 
utility  as  may  be  found  to  be  expedient. 
Ch.  499,  1907. 

Classification  of  utility  service.  Section  1797m — 
35.  The  commission  shall  provide  for  a  comprehen- 
sive classification  of  service  for  each  public  utility  and 
such  classification  may  take  into  account  the  quantity 


WISCONSIN   LAW.  8ll 

used,  the  time  when  used,  the  purpose  for  which  used, 
and  any  other  reasonable  consideration.     Each   pubhc 
utiHty   is   required   to   conform    its   schedules   of   rates, 
tolls  and   charges  to  such  classification. 
Ch.  499,  1907. 

Commission's  rules  of  procedure.  Section  1797m 
— 36.  The  commission  shall  have  power  to  adopt 
reasonable  and  proper  rules  and  regulations  relative 
to  all  inspections,  tests,  audits  and  investigations  and 
to  adopt  and  publish  reasonable  and  proper  rules  to 
govern  its  proceedings  and  to  regulate  the  mode  and 
manner  of  all  investigations  and  hearings  of  public 
utilities  and  other  parties  before  it.  All  hearings  shall 
be  open  to  the  public. 
Ch.  499,  1907. 

Business  management;  inquiries.  Section  1797m — 
37.  The  commission  shall  have  authority  to  inquire 
into  the  management  of  the  business  of  all  public 
utilities  and  -shall  keep  itself  informed  as  to  the  man- 
ner and  method  in  which  the  same  is  conducted,  and 
shall  have  the  right  to  obtain  from  any  public  utility 
all  necessary  information  to  enable  the  commission  to 
perform  its  duties. 

Ch.  499,  1907. 

Books  subject  to  inspection.  Section  1797m — 38. 
I.  The  commission  or  any  commissioner  or  any  per- 
son or  persons  employed  by  the  commission  for  that 
purpose  shall,  upon  demand,  have  the  right  to  inspect 
the  books,  accounts,  papers,  records  and  memoranda 
of  any  public  utility  and  to  examine,  under  oath,  any 
officer,  agent  or  employee  of  such  public  utility  in 
relation  to  its  business  and  affairs. 

2.     Any  person  other  than  one  of  said  commission- 


8l2  PUBLIC   UTILITIES. 

ers,   who   shall  make   such   demand  shall   produce   his 
authority  to  make  such  inspection. 
Ch.  499,  1907. 

Production  of  records  and  papers;  judicial  process. 

Section  1797m — 39.  i.  The  commission  may  require, 
by  order  or  subpoena  to  be  served  on  any  public  util- 
ity in  the  same  manner  that  a  summons  is  served  in 
a  civil  action  in  the  circuit  court,  the  production  within 
this  state  at  such  time  and  place  as  it  may  designate, 
of  any  books,  accounts,  papers,  or  records  kept  by  said 
public  utility  in  any  office  or  place  without  the  state 
of  Wisconsin,  or  verified  copies  in  lieu  thereof,  if  the 
commission  shall  so  order,  in  order  that  an  examina- 
tion thereof  may  be  made  by  the  commission  or  under 
its  direction. 

2.  Any  public  utility  failing  or  refusing  to  comply 
with  any  such  order  or  subpoena  shall,  for  each  day  it 
shall  so  fail  or  refuse,  forfeit  and  pay  into  the  state 
treasury  a  sum  of  not  less  than  fifty  dollars  nor  more 
than  five  hundred  dollars. 
Ch.  499,  1907. 

Commission's  employees.  Section  1797m — 40. 
The  commission  is  authorized  to  employ  such  engi- 
neers, examiners,  experts,  clerks,  accountants  and  other 
assistants  as  it  may  deem  necessary,  at  such  rates  of 
compensation  as  it  may  determine  upon. 
Ch.  499,  1907. 

Agents;  powers.  Section  1797m — 41.  i.  For  the 
purpose  of  making  any  investigation  with  regard  to 
any  public  utility  the  commission  shall  have  power 
to  appoint,  by  an  order  in  writing,  an  agent  whose 
duties  shall  be  prescribed  in  such  order. 

2.     In  the  discharge  of  his  duties  such  agent  shall 


WISCONSIN   LAW.  813 

have  every  power  whatsoever  of  an  inquisitorial  na- 
ture granted  in  this  act  to  the  commission  and  the 
same  powers  as  a  court  commissioner  with  regard  to 
the  taking  of  depositions;  and  all  powers  granted  by 
law  to  a  court  commissioner  relative  to  depositions 
are  hereby  granted  to  such  agent. 

3.  The  commission  may  conduct  any  number  of 
such  investigations  contemporaneously  through  dif- 
ferent agents  and  may  delegate  to  such  agent  the 
taking  of  all  testimony  bearing  upon  any  investigation 
or  hearing.  The  decision  of  the  commission  shall  be 
based  upon  its  examination  of  all  testimony  and  rec- 
ords. The  recommendations  made  by  such  agents 
shall  be  advisory  only  and  shall  not  preclude  the  tak- 
ing of  further  testimony  if  the  commission  so  order 
no  further  investigation. 
Ch.  499,  1907. 

Utilities  to  comply  vnth  commission's  request. 
Section  1797m — 42.  i.  Every  public  utility  shall  fur- 
nish to  the  commission  all  information  required  by  it 
to  carry  into  effect  the  provisions  of  this  act,  and  shall 
make  specific  answers  to  all  questions  submitted  by  the 
commission. 

2.  Any  public  utility  receiving  from  the  commis- 
sion any  blanks  with  directions  to  fill  the  same,  shall 
cause  the  same  to  be  properly  filled  out  so  as  to 
answer  fully  and  correctly  each  question  therein 
propounded,  and  in  case  it  is  unable  to  answer  any 
question,  it  shall  give  a  good  and  sufficient  reason  for 
such  failure;  and  said  answer  shall  be  verified  under 
oath  by  the  president,  secretary,  superintendent  or 
general  manager  of  such  public  utility  and  returned 
to  the  commission  at  its  office  within  the  period  fixed 
by  the  commission. 

3.  Whenever   required   by    the    commission,    every 


8l4  PUBLIC   UTILITIES. 

public  utility  shall  deliver  to  the  commission,  any  or 
all  maps,  profiles,  contracts,  reports  of  engineers  and 
all  documents,  books,  accounts,  papers  and  records 
or  copies  of  any  or  all  of  the  same,  with  a  complete 
inventory  of  all  its  property,  in  such  form  as  the  com- 
mission may  direct. 
Ch.  499,  1907. 

Complaint  by  consumers.  Section  1797m — 43.  Up- 
on a  complaint  made  against  any  public  utility  by  any 
mercantile,  agricultural  or  manufacturing  society  or 
by  any  body  politic  or  municipal  organization  or  by 
any  twenty-five  persons,  firms,  corporations  or  associa- 
tions, that  any  of  the  rates,  tolls,  charges  or  schedules 
or  any  joint  rate  or  rates  are  in  any  respect  unreason- 
able or  unjustly  discriminatory,  or  that  any  regulation, 
measurement,  practice  or  act  whatsoever  affecting  or 
relating  to  the  production,  transmission,  delivery  or 
furnishing  of  heat,  light  or  power  or  any  service  in 
connection  therewith  or  the  conveyance  of  any  tele- 
phone message  or  any  service  in  connection  therewith 
is  in  any  respect  unreasonable,  insufificient  or  unjustly 
discriminatory,  or  that  any  service  is  inadequate  or 
can  not  be  obtained,  the  commission  shall  proceed, 
with  or  without  notice,  to  make  such  investigation  as 
it  may  deem  necessary  or  convenient.  But  no  order 
affecting  said  rates,  tolls,  charges,  schedules,  regula- 
tions, measurements,  practice  or  act  complained  of 
shall  be  entered  by  the  commission  without  a  formal 
public  hearing. 

Ch.  499,  1907. 

Hearing.  Section  1797m — 44.  The  commission 
shall,  prior  to  such  formal  hearing,  notify  the  public 
utility  complained  of  that  a  complaint  has  been  made, 
and    ten    days    after    such    notice    has    been    given    the 


WISCONSIN  LAW.  815 

commission  may  proceed  to  set  a  time  and  place  for 
a  hearing  and  an  investigation  as  hereinafter  provided. 
Ch.  499,  1907. 

Notice  of  hearing.  Section  1797m — 45.  The  com- 
mission shall  give  the  public  utility  and  the  complain- 
ant, if  any,  ten  days'  notice  of  the  time  and  place 
when  and  where  such  hearing  and  investigation  will 
be  held  and  such  matters  considered  and  determined. 
Both  the  public  utility  and  complainant  shall  be  en- 
titled to  be  heard  and  shall  have  process  to  enforce  the 
attendance  of  witnesses. 
Ch.  499,  1907. 

Commission  to  fix  rates  and  regulations.  Section 
1797m — 46.  I.  If  upon  such  investigation  the  rates, 
tolls,  charges,  schedules,  or  joint  rates,  shall  be  found 
to  be  unjust,  unreasonable,  insufficient  or  unjustly  dis- 
criminatory or  to  be  preferential  or  otherwise  in  vio- 
lation of  any  of  the  provisions  of  this  act,  the  com- 
mission shall  have  power  to  fix  and  order  substituted 
therefor  such  rate  or  rates,  tolls,  charges  or  schedules 
as  shall  be  just  and  reasonable. 

2.  If  upon  such  investigation  it  shall  be  found 
that  any  regulation,  measurement,  practice,  act,  or 
service  complained  of  is  unjust,  unreasonable,  insuf- 
ficient, preferential,  unjustly  discriminatory  or  other- 
wise in  violation  of  any  of  the  provisions  of  this  act, 
or  if  it  be  found  that  any  service  is  inadequate  or  that 
any  reasonable  service  can  not  be  obtained,  the  com- 
mission shall  have  power  to  substitute  therfefor  such 
other  regulations,  measurements,  practices,  service  or 
acts  and  to  make  such  order  respecting,  and  such 
changes  in  such  regulations,  measurements,  practices, 
service  or  acts  as  shall  be  just  and  reasonable. 
Ch.  499,  1907. 


8l6  PUBLIC   UTILITIES. 

Costs  of  investigation.  Section  1797m — 47.  If 
upon  such  investigation  it  shall  be  found  that  any  rate, 
toll,  charge,  schedule  or  joint  rate  or  rates  is  unjust, 
unreasonable,  insufficient  or  unjustly  discriminatory 
or  preferential  or  otherwise  in  violation  of  any  of  the 
provisions  of  this  act,  or  that  any  regulation,  practice, 
act  or  service  complained  of  is  unjust,  unreasonable, 
insufficient,  preferential  or  otherwise  in  violation  of 
any  of  the  provisions  of  this  act,  or  if  it  be  found  that 
any  service  is  inadequate  or  that  any  reasonable  service 
can  not  be  obtained,  the  public  utility  found  to  be  at 
fault  shall  pay  the  expenses  incurred  by  the  commis- 
sion upon  such  investigation. 
Ch.  499,  1907. 

Separate  rate  hearings;  absence  of  direct  damage. 

Section  1797m — 48.  The  commission  may,  in  its  dis- 
cretion, when  complaint  is  made  of  more  than  one 
rate  or  charge,  order  separate  hearings  thereon,  and 
may  consider  and  determine  the  several  matters  com- 
plained of  separately  and  at  such  times  as  it  may  pre- 
scribe. No  complaint  shall  at  any  time  be  dismissed 
because  of  the  absence  of  direct  damage  to  the  com- 
plainant. 

Ch.  499,  1907. 

Summary  investigations.  Section  1797m — 49. 
Whenever  the  commission  shall  beUeve  that  any  rate 
or  charge  may  be  unreasonable  or  unjustly  discrimi- 
natory or  that  any  service  is  inadequate  or  can  not  be 
obtained  or  that  an  investigation  of  any  matter  relat- 
ing to  any  public  utility  should  for  any  reason  be 
made,  it  may  on  its  own  motion,  summarily  investi- 
gate the  same  with  or  without  notice. 
Ch.  499,  1907. 

Formal    hearings.     Section     1797m — 50.     If,    after 


WISCONSIN  LAW.  817 

making  such  investigation,  the  commission  becomes 
satisfied  that  sufficient  grounds  exist  to  warrant  a 
formal  hearing  being  ordered  as  to  the  matters  so 
investigated,  it  shall  furnish  such  public  utility  inter- 
ested a  statement  notifying  the  public  utility  of  the 
matters  under  investigation.  Ten  days  after  such 
notice  has  been  given  the  commission  may  proceed 
to  set  a  time  and  place  for  a  hearing  and  an  investi- 
gation as  hereinbefore  provided. 
Ch.  499,  1907. 

Notices;  procedure.  Section  1797m — 51.  Notice 
of  the  time  and  place  for  such  hearing  shall  be  given 
to  the  public  utility  and  to  such  other  interested  per- 
sons as  the  commission  shall  deem  necessary  as  pro- 
vided in  section  1797m — 45,  and  thereafter  proceeding 
shall  be  had  and  conducted  in  reference  to  the  matter 
investigated  in  like  manner  as  though  complaint  had 
been  filed  with  the  commission  relative  to  the  matter 
investigated,  and  the  same  order  or  orders  may  be 
made  in  reference  thereto  as  if  such  investigation  had 
been  made  on  complaint. 
Ch.  499,  1907. 

Utilities  may  complain.  Section  1797m — 52.  Any 
public  utility  may  make  complaint  as  to  any  matter 
affecting  its  own  product  or  service  with  like  effect 
as  though  made  by  any  mercantile,  agricultural  or 
manufacturing  society,  body  politic  or  municipal  organ- 
ization or  by  any  twenty-five  persons,  firms,  corpora- 
tions or  associations. 
Ch.  499.  1907. 

Witness;  evidence;  proceedings  for  contempt.  Sec- 
tion 1797m — 53.  I.  Each  of  the  commissioners  and 
every  agent  provided  for  in  section  1797m — 41  of  this 
act  for  the  purposes  mentioned  in  this  act.  shall  have 

52— Pub.  Ut 


8i8 


PUBLIC   UTILITIES. 


power  to  administer  oaths,  certify  to  official  acts,  issue 
subpoenas,  compel  the  attendance  of  witnesses  and  the 
production  of  books,  accounts,  papers,  records,  docu- 
ments and  testimony. 

2.  In  case  of  disobedience  on  the  part  of  any 
person  or  persons  to  comply  with  any  order  of  the 
commission  or  any  commissioner  or  any  subpoena  or, 
on  the  refusal  of  any  witness  to  testify  to  any  matter 
regarding  which  he  may  be  lawfully  interrogated  be- 
fore the  commission  or  its  agent  authorized  as  pro- 
vided in  section  1797m — 41,  it  shall  be  the  duty  of  the 
circuit  court  of  any  county  or  the  judge  thereof,  on 
application  of  a  commissioner  to  compel  obedience  by 
attachment  proceedings  for  contempt  as  in  the  case 
of  disobedience  of  the  requirements  of  a  subpcena  is- 
sued from  such  court  or  a  refusal  to  testify  therein, 
Ch.  499,  1907. 

Witness  fees  and  mileage.  Section  1797m — 54. 
I.  Each  witness  who  shall  appear  before  the  com- 
mission or  its  agent  by  its  order,  shall  receive  for  his 
attendance  the  fees  and  mileage  now  provided  for 
witnesses  in  civil  cases  in  courts  of  record,  which  shall 
be  audited  and  paid  by  the  state  in  the  same  manner 
as  other  expenses  are  audited  and  paid,  upon  the 
presentation  of  proper  vouchers  sworn  to  by  such 
witnesses  and  approved  by  the  chairman  of  the  com- 
mission. 

2.  No  witness  subpoenaed  at  the  instance  of  par- 
ties other  than  the  commission  shall  be  entitled  to 
compensation  from  the  state  for  attendance  or  travel 
unless  the  commission  shall  certify  that  his  testimony 
was  material  to  the  matter  investigated. 
Ch.  499,  1907. 

Depositions.  Section  1797m — 55.  The  commis- 
sion or  any  party  may,  in  any  investigation,  cause  the 


WISCONSIN  LAW.  819 

depositions  of  witnesses  residing  within  or  without  the 
state  to  be  taken  in  the  manner  prescribed  by  law  for 
Hke  depositions  in  civil  actions  in  circuit  courts. 
Ch.  499,  1907. 

Stenographic  records.  Section  1797m — 56.  A  full 
and  complete  record  shall  be  kept  of  all  proceedings 
had  before  the  commission  or  its  agent  on  any  formal 
investigation  had  and  all  testimony  shall  be  taken  down 
by  the  stenographer  appointed  by  the  commission. 
Ch.  499,  1907. 

Transcript  of  testimony;  filing.  Section  1797m — 
57.  Whenever  any  complaint  is  served  upon  the 
commission  under  the  provisions  of  section  1797m — 64 
of  this  act,  the  commission  shall,  before  said  action  is 
reached  for  trial,  cause  a  certified  transcript  of  all 
proceedings  had  and  testimony  taken  upon  such  in- 
vestigation to  be  filed  with  the  clerk  of  the  circuit 
court  of  the  county  where  the  action  is  pending. 
Ch.  499,  1907. 

Admissibility  of  evidence.  Section  1797m — 58.  A 
transcribed  copy  of  the  evidence  and  proceedings  or 
any  specific  part  thereof,  on  any  investigation  taken 
by  the  stenographer  appointed  by  the  commission, 
being  certified  by  such  stenographer  to  be  a  true  and 
correct  transcript  in  longhand  of  all  testimony  on  the 
investigation  or  of  a  particular  witness,  or  of  other 
specific  part  thereof,  carefully  compared  by  him  with 
his  original  notes,  and  to  be  a  correct  statement  of 
the  evidence  and  proceedings  had  on  such  investigation 
so  purporting  to  be  taken  and  transcribed,  shall  be 
received  in  evidence  with  the  same  effect  as  if  such  re- 
porter were  present  and  testified  to  the  fact  so  certi- 
fied. 

Ch.  499.  1907. 


820  PUBLIC   UTILITIES, 

Free   transcripts   for   parties.     Section    1797m — 59. 
A  copy  of  such  transcript  shall  be  furnished  on  demand 
free  of  cost  to  any  party  to  such  investigations. 
Ch,  499,  1907. 

Commission  to  determine  rates  and  regulations; 
costs;  orders,  service  and  effect.  Section  1797m — 60. 
I.  Whenever,  upon  an  investigation  made  under  the 
provisions  of  this  act,  the  commission  shall  find  any 
existing  rates,  tolls,  charges,  schedules  or  joint  rate 
or  rates  to  be  unjust,  unreasonable,  insufficient  or  un- 
justly discriminatory  or  to  be  preferential  or  other- 
wise in  violation  of  any  of  the  provisions  of  this  act, 
the  commission  shall  determine  and  by  order  fix  rea- 
sonable rates,  tolls,  charges,  schedules  or  joint  rates 
to  be  imposed,  observed  and  followed  in  the  future  in 
lieu  of  those  found  to  be  unjust,  unreasonable,  insuf- 
ficient or  unjustly  discriminatory  or  preferential  or 
otherwise  in  violation  of  any  of  the  provisions  of  this 
act. 

2.  Whenever,  upon  an  investigation  made  under 
the  provisions  of  this  act,  the  commission  shall  find 
any  regulations,  measurements,  practices,  acts  or  serv- 
ice to  be  unjust,  unreasonable,  insufficient,  preferen- 
tial, unjustly  discriminatory  or  otherwise  in  violation 
of  any  of  the  provisions  of  this  act;  or  shall  find  that 
any  service  is  inadequate  or  that  any  service  which 
can  be  reasonably  demanded  can  not  be  obtained,  the 
commission  shall  determine  and  declare  and  by  order 
fix  reasonable  measurements,  regulations,  acts,  prac- 
tices or  service  to  be  furnished,  imposed,  observed  and 
followed  in  the  future  in  lieu  of  those  found  to  be  un- 
just, unreasonable,  insufficient,  preferential,  unjustly 
discriminatory,  inadequate  or  otherwise  in  violation  of 
this  act  as  the  case  may  be,  and  shall  make  such  other 


WISCONSIN   LAW.  821 

order    respecting    such    measurement,    regulation,    act, 
practice  or  service  as  shall  be  just  and  reasonable. 

3.  Whenever,  upon  an  investigation  made  under 
the  provisions  of  this  act,  the  commission  shall  find 
that  any  rate,  toll,  charge,  schedule  or  joint  rate  or 
rates  is  unjust,  unreasonable,  insufficient  or  unjustly 
discriminatory  or  preferential  or  otherwise  in  violation 
of  any  of  the  provisions  of  this  act,  or  that  any  meas- 
urement, regulation,  practice,  act  or  service  com- 
plained of  is  unjust,  unreasonable,  insufficient,  prefer- 
ential, unjustly  discriminatory  or  otherwise  in  violation 
of  any  of  the  provisions  of  this  act,  or  it  shall  find  that 
any  service  is  inadequate  or  that  any  service  which 
can  reasonably  be  demanded  can  not  be  obtained,  the 
commission  shall  ascertain  and  declare  and  by  order 
fix  the  expenses  incurred  by  the  commission  upon 
such  investigation  and  shall  by  such  order  direct  such 
public  utility  to  pay  the  state  treasurer  within  twenty 
days  thereafter  such  expenses  so  incurred. 

4.  The  commission  shall  cause  a  certified  copy  of 
all  such  orders  to  be  delivered  to  an  officer  or  agent 
of  the  public  utility  aflfected  thereby,  and  all  such 
orders  shall  of  their  own  force  take  effect  and  become 
operative  twenty  days  after  service  thereof,  unless  a 
different  time  be  provided  by  said  order. 

Ch.  499,  1907. 

Utilities  to  conform.  Section  1797m — 61.  All  pub- 
lic utilities  to  which  the  order  applies  shall  make  such 
changes  in  their  schedules  on  file  as  may  be  necessary 
to  make  the  same  conform  to  said  order,  and  no 
changes  shall  thereafter  be  made  by  any  public  utility 
in  any  such  rates,  tolls  or  charges,  or  in  any  joint  rate 
or  rates,  without  the  approval  of  the  commission. 
Certified  copies  of  all  other  orders  of  the  commission 
shall  be  delivered  to  the  public  utility  affected  thereby 


822  PUBLIC   UTILITIES. 

in  like  manner,  and  the  same  shall  take  effect  within 
such  time  thereafter  as  the  commission  shall  prescribe. 
Ch.  499,  1907. 

Commission  may  change  orders.  Section  1797m — 
62.  The  commission  may  at  any  time,  upon  notice  to 
the  public  utility  and  after  opportunity  to  be  heard  as 
provided  in  section  1797m — 45,  rescind,  alter  or  amend 
any  order  fixing  any  rate  or  rates,  tolls,  charges  or 
schedules,  or  any  other  order  made  by  the  commis- 
sion, and  certified  copies  of  the  same  shall  be  served 
and  take  effect  as  herein  provided  for  original  orders, 
Ch.  499,   1907. 

Findings  prima  facie  lawful  and  reasonable.  Sec- 
tion 1797m — 63.  All  rates,  tolls,  charges,  schedules, 
and  joint  rates  fixed  by  the  commission  shall  be  in 
force  and  shall  be  prima  facie  lawful,  and  all  regula- 
tions, practices  and  services  prescribed  by  the  com- 
mission shall  be  in  force  and  shall  be  prima  facie  rea- 
sonable until  finally  found  otherwise  in  an  action 
brought  for  that  purpose  pursuant  to  the  provisions 
of  section  1797m — 64. 
Ch.  499,  1907. 

Action  to  set  aside;  precedence  on  calendar.  Sec- 
tion 1797m — 64.  I.  Any  public  utility  and  any  per- 
son or  corporation  in  interest  being  dissatisfied  with 
any  order  of  the  commission  fixing  any  rate  or  rates, 
tolls,  charges,  schedules,  joint  rate  or  rates  or  any  or- 
der fixing  any  regulations,  practices,  act  or  service  may 
commence  an  action  in  the  circuit  court  for  Dane 
county  against  the  commission  as  defendant  to  vacate 
and  set  aside  any  such  order  on  the  ground  that  the 
rate  or  rates,  tolls,  charges,  schedules,  joint  rate  or 
rates,  fixed  in  such  order  is  unlawful,  or  that  any  such 
regulation,  practice,  act  or  service  fixed  in  such  order 


WISCONSIN  LAW.  823 

is   unreasonable,    in   which    action    the   complaint    shall 
be  served  with  the  summons. 

2.  The  answer  of  the  commission  to  the  complaint 
shall  be  served  and  filed  within  ten  days  after  service 
of  the  complaint,  whereupon  said  action  shall  be  at 
issue  and  stand  ready  for  trial  upon  ten  days'  notice 
to  either  party. 

3.  All  such  actions  shall  have  precedence  over  any 
civil  cause  of  a  different  nature  pending  in  such  court, 
and  the  circuit  court  shall  always  be  deemed  open  for 
the  trial  thereof,  and  the  same  shall  be  tried  and  de- 
termined as  other  civil  actions. 

Ch.  499,  1907. 

Appeals  and  actions  to  set  aside;  limitation  ninety 
days.  Section  1797m — 65.  Every  proceeding,  action 
or  suit  to  set  aside,  vacate  or  amend  any  determination 
or  order  of  the  commission  or  to  enjoin  the  enforce- 
ment thereof  or  to  prevent  in  any  way  such  order  or 
determination  from  becoming  effective,  shall  be  com- 
menced, and  every  appeal  to  the  courts  or  right  or 
recourse  to  the  courts  shall  be  taken  or  exercised 
within  ninety  days  after  the  entry  or  rendition  of  such 
order  or  determination,  and  the  right  to  commence 
any  such  action,  proceeding  or  suit,  or  to  take  or  exer- 
cise any  such  appeal  or  right  of  recourse  to  the  courts, 
shall  terminate  absolutely  at  the  end  of  such  ninety 
days  after  such  entry  or  rendition  thereof. 
Ch.  499,  1907. 

Injunctions  issuing.  Section  1797m — 66.  No  in- 
junction shall  issue  suspending  or  staying  any  order  of 
the  commission,  except  upon  application  to  the  circuit 
court  or  presiding  judge  thereof,  notice  to  the  com- 
mission, and  hearing. 
Ch.  499,  1907. 


824  PUBLIC   UTILITIES. 

New  evidence  upon  trial;  transmission  to  commis- 
sion; stay  of  proceedings.  Section  1797m — 67.  i. 
If,  upon  the  trial  of  such  action,  evidence  shall  be  in- 
troduced by  the  plaintiff  which  is  found  by  the 
court  to  be  different  from  that  offered  upon  the 
hearing  before  the  commission  or  its  authorized  agent, 
or  additional  thereto,  the  court  before  proceeding  to 
render  judgment  unless  the  parties  to  such  action  stip- 
ulate in  writing  to  the  contrary,  shall  transmit  a  copy 
of  such  evidence  to  the  commission  and  shall  stay  fur- 
ther proceedings  in  said  action  for  fifteen  days  from 
the  date  of  such  transmission. 
Ch.  499,   1907. 

Reconsideration  by  commission.  2.  Upon  the  re- 
ceipt of  such  evidence  the  commission  shall  consider 
the  same  and  may  alter,  modify,  amend  or  rescind  its 
order  relating  to  such  rate  or  rates,  tolls,  charges, 
schedules,  joint  rate  or  rates,  regulations,  practice,  act 
or  service  complained  of  in  said  action,  and  shall  re- 
port its  action  thereon  to  said  court  within  ten  days 
from  the  receipt  of  such  evidence. 
Ch.  499,  1907. 

Supplemental  findings;  procedure  by  court.  Sec- 
tion 1797m — 68.  I.  If  the  commission  shall  rescind 
its  order  complained  of,  the  action  shall  be  dismissed; 
if  it  shall  alter,  modify  or  amend  the  same,  such  al- 
tered, modified  or  amended  order  shall  take  the  place 
of  the  original  order  complained  of,  and  judgment 
shall  be  rendered  thereon  as  though  made  by  the  com- 
mission in  the  first  instance. 

2.     If  the  original  order  shall  not  be  rescinded  or 
changed   by   the    commission   judgment   shall   be   ren- 
dered upon  such  original  order. 
Ch.  499,  1907. 


WISCONSIN  LAW.  825 

Appeal  to  supreme  court.  Section  1797m — 69. 
Either  party  to  said  action,  within  sixty  days  after 
service  of  a  copy  of  the  order  or  judgment  of  the  cir- 
cuit court,  may  appeal  to  the  supreme  court.  Where 
an  appeal  is  taken  the  cause  shall,  on  the  return  of  the 
papers  to  the  supreme  court,  be  immediately  placed 
on  the  state  calendar  of  the  then  pending  term  and 
shall  be  assigned  and  brought  to  a  hearing  in  the  same 
manner  as  other  causes  on  the  state  calendar. 
Ch.  499,   1907. 

Burden  of  proof.  Section  1797m — 70.  In  all  trials, 
actions,  and  proceedings  arising  under  the  provisions 
of  this  act  or  growing  out  of  the  exercise  of  the  au- 
thority and  powers  granted  herein  to  the  commission, 
the  burden  of  proof  shall  be  upon  the  party  adverse  to 
such  commission  or  seeking  to  set  aside  any  determi- 
nation, requirement,  direction  or  order  of  said  com- 
mission to  show  by  clear  and  satisfactory  evidence  that 
the  determination,  requirement,  direction  or  order  of 
the  commission  complained  of  is  unreasonable  or  un- 
lawful as  the  case  may  be. 
Ch.  499,   1907. 

Court  procedure  and  officers.  Section  1797m — 71. 
In  all  actions  and  proceedings  in  court  arising  under 
this  act  all  processes  shall  be  served  and  the  practice 
and  rules  of  evidence  shall  be  the  same  as  in  civil 
actions,  except  as  otherwise  herein  provided.  Every 
sheriff  or  other  officer  empowered  to  execute  civil  pro- 
cesses shall  execute  any  process  issued  under  the  pro- 
visions of  this  act  and  shall  receive  such  compensation 
therefor  as  may  be  prescribed  by  law  for  similar  serv- 
ices. 

Ch.  499,   1907. 

Incriminating    evidence.     Section     1797m — 72.     No 


826  PUBLIC   UTILITIES. 

person  shall  be  excused  from  testifying  or  from  pro- 
ducing books,  accounts  and  papers  in  any  proceeding 
based  upon  or  growing  out  of  any  violation  of  the  pro- 
visions of  this  act  on  the  ground  or  for  the  reason  that 
the  testimony  or  evidence,  documentary  or  otherwise, 
required  by  him  may  tend  to  incriminate  him  or  sub- 
ject him  to  penalty  or  forfeiture ;  but  no  person  having 
so  testified  shall  be  prosecuted  or  subjected  to  any 
penalty  or  forfeiture  for  or  on  account  of  any  trans- 
mission, matter  or  thing  concerning  which  he  may 
have  testified  or  produced  any  documentary  evidence; 
provided,  that  no  person  so  testifying  shall  be  ex- 
empted from  prosecution  or  punishment  for  perjury 
in  so  testifying. 

Ch.  499,  1907. 

Distribution  of  orders.  Section  1797m — 73.  Upon 
application  of  any  person  the  commission  shall  furnish 
certified  copies,  under  the  seal  of  the  commission,  of 
any  order  made  by  it,  which  shall  be  prima  facie  evi- 
dence of  the  facts  stated  therein. 
Ch.  499,  1907. 

*  Competition    of    utilities;    indeterminate    permits. 

Section  1797m — 74.  i.  No  license,  permit  or  fran- 
chise shall  be  granted  to  any  person,  copartnership  or 
corporation  to  own,  operate,  manage  or  control  any 
plant   or   equipment   for   the   production,    transmission, 


*  Ch.  14,  1911.  Section  1.  All  licenses,  permits  and  franchises  to 
own,  operate,  manage  or  control  any  plant  or  equipment  for  the  pro- 
duction, transmission,  delivery  or  furnishing  of  heat,  light,  water  or 
power  in  any  municipality,  heretofore  granted  or  attempted  to  be 
granted  to  any  public  utility  by  or  by  virtue  of  any  ordinance  pend- 
ing or  under  consideration  in  the  municipal  council  of  any  munici- 
pality at  the  time  of  the  obtaining  of  an  indeterminate  permit  by  any 
other  public  utility  operating  therein,  are  hereby  validated  and  con- 
firmed and  shall  not  be  affected  by  the  provisions  of  subsection  1  of 
section  1797m— 74  of  the  statutes. 


WISCONSIN   LAW,  827 

delivery  or  furnishing  of  heat,  Hght,  water  or  power 
in  any  municipality,  where  there  is  in  operation  under 
an  indeterminate  permit,  as  provided  in  this  act,  a 
public  utility  engaged  in  similar  service,  and  no  tele- 
phone exchange  for  furnishing  local  service  to  subscribers 
within  any  village  or  city  slwll  be  installed  in  such  village 
or  city  by  any  public  utility,  other  than  those  already  fur- 
nishing such  telephone  service  therein,  where  there  is  in 
operation  in  such  village  or  city  a  public  utility  engaged 
in  similar  service,  without  first  securing  from  the  com- 
mission a  declaration  after  a  public  hearing  of  all  par- 
ties interested,  that  public  convenience  and  necessity 
require  such  second  public  utility.  This  subsection  shall 
not  prevent  or  impose  any  condition  upon  the  extension  of 
any  telephone  line  from  any  town  into  or  through  any  city 
or  village  for  the  purpose  of  connecting  with  any  telephone 
exchange  in  such  city  or  village  or  connecting  with  any  other 
telephone  line  or  system.  Any  puhlic  utility  operating  any 
telephone  exchange  in  any  city  or  village  shall,  on  demand, 
extend  its  lines  to  the  limits  of  such  city  or  village  for  the 
purposes  mentioned  and  subject  to  the  conditions  and  re- 
quirements prescnbed  in  sections  1797m — Jf  and  1797m 
—SO: 

Ch.  499,  1907;  ch.  546,  191 1. 

2.  Any  existing  permit,  license  or  franchise  which 
shall  contain  any  term  whatsoever  interfering  with 
the  existence  of  such  second  public  utility  is  hereby 
amended  in  such  a  manner  as  to  permit  such  munici- 
pality to  grant  an  indeterminate  permit  for  the  opera- 
tion of  such  second  public  utility  pursuant  to  the  pro- 
visions of  this  act. 

Ch.  499,   1907. 

3.  No  municipality  shall  hereafter  construct  any 
such  plant  or  equipment  where  there  is  in  operation 
under  an  indeterminate  permit  as  provided  in  this  act, 


828  PUBLIC  UTILITIES. 

in  such  municipality  a  public  utility  engaged  in  simi- 
lar service,  without  first  securing  from  the  commission 
a  declaration,  after  a  public  hearing  of  all  parties  in- 
terested, that  public  convenience  and  necessity  require 
such  municipal  public  utility.  But  nothing  in  this  sec- 
tion shall  be  construed  as  preventing  a  municipality 
acquiring  any  existing  plant  by  purchase  or  by  con- 
demnation as  hereinafter  provided. 
Ch.  499,  1907. 

4.  Nothing  in  this  section  shall  be  construed  so 
as  to  prevent  the  granting  of  an  indeterminate  permit 
or  the  construction  of  a  municipal  plant  where  the 
existing  public  utility  is  operating  without  an  inde- 
terminate permit  as  provided  in  this  act. 
Ch.  499,  1907. 

Foreign  utilities  excluded.  Section  1797m — 75. 
No  license,  permit  or  franchise  to  own,  operate,  man- 
age or  control  any  plant  or  equipment  for  the  pro- 
duction, transmission,  delivery  or  furnishing  of  heat, 
light,  water  or  power  shall  be  hereafter  granted,  or 
transferred  except  to  a  corporation  duly  organized 
under  the  laws  of  the  state  of  Wisconsin. 
Ch.  499,   1907. 

Grants  hereafter  to  be  indeterminate;  municipal 
acquisition.  Section  1797m — 76.  Every  license,  per- 
mit or  franchise  hereafter  granted  to  any  public  utility 
shall  have  the  effect  of  an  indeterminate  permit  sub- 
ject to  the  provisions  of  this  act,  and  subject  to  the 
provision  that  the  municipality  in  which  the  major  part 
of  its  property  is  situate  may  purchase  the  property 
of  such  pubHc  utility  actually  used  and  useful  for  the 
convenience  of  the  public  at  any  time  as  provided 
herein  paying  therefor  just  compensation  to  be  deter- 
mined by  the  commission  and  according  to  the  terms 


WISCONSIN   LAW,  829 

and  conditions  fixed  by  said  commission.  Any  such 
municipality  is  authorized  to  purchase  such  property 
and  every  such  pubhc  utiHty  is  required  to  sell  such 
property  at  the  value  and  according  to  the  terms  and 
conditions  determined  by  the  commission  as  herein 
provided. 

Ch.  499,   1907. 

*Indeterminate  permit.  Section  1797m — -jy.  Every 
license  permit,  or  franchise  granted  prior  to  July  11,  1901 , 
hy  the  state  or  by  the  common  council,  the  hoard  of  alder- 
men, the  hoard  of  trustees,  the  town  or  village  hoard,  or 
any  other  governing  hody  of  any  town,  village,  or  city,  to 
any  corporation,  company,  individual,  association  of  indi- 
viduals, their  lessees,  trustees,  or  receivers  appointed  hy  any 
court  ivhatsoever,  authorizing  and  empowering  such  grantee 
or  grantees  to  own,  operate,  manage,  or  control  any  plant 
or  equipment,  or  any  part  _  of  a  plant  or  equipment  within 
this  state,  for  the  conveyance  of  telephone  messages,  or  for 
the  production,  transmission,  delivery,  or  furnishing  of  heat, 
light,  water,  or  power,  either  directly  or  indirectly,  to  or 
for  the  public,  is  so  altered  and  amended  as  to  constitute  and 
to  be  an  "indeterminate  permit"  within  the  terms  and  mean- 
ing of  sections  lldlm — 1,  to  1797m — 108,  inclusive,  of  the 


•Ch.  217,  1911.  Section  1.  No  franchise  heretofore  surrendered  by 
any  corporation  of  this  state  in  the  manner  and  within  the  time  pro- 
vided by  section  1797m— 77,  and  no  indeterminate  permit  based  there- 
on, shall  be  declared  invalid  by  reason  of  any  defect,  irregularity  or 
invalidity  In  such  franchise  whatsoever,  provided  that  such  fran- 
chises shall  not  have  been  obtained  by  fraud,  bribery  or  corrupt  prac- 
tices; that  when  such  franchise  was  granted  no  officer  of  the  munici- 
pality granting  the  same  was  directly  or  indirectly  interested  in  such 
franchise  or  in  the  corporation  obtaining  same;  and  that  the  cor- 
poration having  the  same  shall  have  prior  to  the  surrendering  of  said 
franchise  in  good  faith  purchased  or  constructed  any  street  or  inter- 
urban  railway,  water  works,  gas  or  electric  light  plant,  or  other  pub- 
lic utility  or  any  part  thereof  by  such  franchise  authorized;  and  sub- 
ject to  the  foregoing  exceptions,  every  such  franchise  and  permit  Is 
hereby  legalized  and  confirmed. 


n 


830  PUBLIC   UTILITIES. 

statutes  of  1898,  and  subject  to  all  the  terms,  provisions, 
conditions,  and  limitations  of  said  sections  1797m — 1  to 
1797m — 108,  inclusive,  and  shall  have  the  same  force  and 
effect  as  a  license,  permit,  or  franchise  granted  after  July 
11,  1907,  to  any  public  utility  embraced  in  and  subject  to 
the  provisions  of  said  sections  1797m — 1  to  1797m — 108, 
inclusive,  except  as  provided  by  section  1797m — 80. 

Ch.  499,  1907;  ch.   180,  1909;  ch.  596,  1911. 

Future  grants;  acceptance;  implied  consent  and 
waiver.  Section  1797m — 78.  Any  public  utility  ac- 
cepting or  operating  under  any  license,  permit  or  fran- 
chise hereafter  granted  shall,  by  acceptance  of  any 
such  indeterminate  permit  be  deemed  to  have  consented 
to  a  future  purchase  of  its  property  actually  used  and 
useful  for  the  convenience  of  the  public  by  the  mu- 
nicipality in  which  the  major  part  of  it  is  situate  for 
the  compensation  and  under  the  terms  and  conditions 
determined  by  the  commission,  and  shall  thereby  be 
deemed  to  have  waived  the  right  of  requiring  the 
necessity  of  such  taking  to  be  established  by  the  ver- 
dict of  a  jury,  and  to  have  waived  all  other  remedies 
and  rights  relative  to  condemnation,  except  such  rights 
and  remedies  as  are  provided  in  this  act. 
Ch.  499,   1907. 

Municipalities;    powers;    acquiring    and    operating 

plants.  Section  1797m — 79.  i.  Any  municipality 
shall  have  the  power,  subject  to  the  provisions  of  this 
act,  to  construct  and  operate  a  plant  and  equipment 
or  any  part  thereof  for  the  production,  transmission, 
delivery  or  furnishing  of  heat,  light,  water  or  power. 

2.  Any  municipality  shall  have  the  power,  subject 
to  the  provisions  of  this  act,  to  purchase  by  an  agree- 
ment with  any  public  utility  any  part  of  any  plant, 
provided,   that   such    purchase   and   the   terms   thereof 


WISCONSIN   LAW.  83! 

shall  be  approved  by  the  commission  after  a  hearing 
as  provided  in  sections  1797m — 81  and  1797m — 82. 

3.  Any  municipality  shall  have  the  power,  subject 
to  the  provisions  of  this  act  to  acquire  by  condemna- 
tion the  property  of  any  public  utility  actually  used 
and  useful  for  the  convenience  of  the  public  then 
operating  under  a  license,  permit  or  franchise  existing 
at  the  time  this  act  takes  effect,  or  operating  in  such 
municipality  without  any  permit  or  franchise. 

4.  Any  municipality  shall  have  the  power,  subject 
to  the  provisions  of  this  act,  to  acquire  by  purchase 
as  provided  in  this  act,  the  property  of  any  public 
utility  actually  used  and  useful  for  the  convenience 
of  the  public  operating  under  any  indeterminate  per- 
mit as  provided  herein. 

Ch.  499,   1907. 

^Existing  plants;  action  by  municipalities  to  ac- 
quire. Section  1797m — 80.  If  the  municipality  shall 
have  determined  to  acquire  an  existing  plant  then 
operated  under  *  *  *  an  indeterminate  permit  pro- 
vided in  section  1797m — 77,  by  a  vote  of  a  majority  of 
the  electors  voting  thereon  at  any  general,  municipal, 
or  special  election  at  which  the  question  of  the  pur- 
chase  of   such   plant   shall   have   been   submitted,    such 


*  Ch.  12,  1911.  Section  1.  Whenever  the  railroad  commission  has 
under  the  provisions  of  sections  1797m— 80  to  17S7m— S6  of  the  stat- 
utes, fixed,  determined  and  certified  just  compensation  to  be  paid  for 
the  taking  of  the  property  of  a  public  utility  by  the  municipality,  and 
has  proceeded  as  provided  by  law  in  all  particulars  except  that  such 
fixing,  determination  and  certification  have  not  been  completed  with- 
in the  time  provided  for  by  such  sections,  the  just  compensation 
fixed,  determined,  and  certified  by  such  railroad  commission  shall 
nevertheless  be  deemed  to  be  the  just  compensation  that  shall  be  paid 
by  such  municipality  to  the  public  utility  for  the  acquisition  of  such 
property,  and  such  fixing,  determination  and  certification  shall  have 
the  same  force  and  effect  as  though  they  had  been  done  and  com- 
pleted within  the  time  provided  for  by  law. 


832  PUBLIC   UTILITIES. 

municipality  shall  bring  an  action  in  the  circuit  court 
against  the  public  utility  as  defendant  praying  the  court 
for  an  adjudication  as  to  the  necessity  of  such  taking 
by  the  municipality,  by  which  action  the  complaint 
shall  be  served  with  the  summons.  The  public  utiHty 
shall  serve  and  file  its  answer  to  such  complaint  within 
ten  days  after  the  service  thereof,  whereupon  such 
action  shall  be  at  issue  and  stand  ready  for  trial  upon 
ten  days'  notice  by  either  party.  Unless  the  parties 
thereto  waive  a  jury,  the  question  as  to  the  necessity 
of  the  taking  of  such  property  by  the  municipality 
shall  be  as  speedily  as  possible  submitted  to  a  jury. 
Ch.  499,  1907;  ch.  213,  1909;  ch.  596,  191 1. 

Indeterminate  permit;  notice.  Section  1797m — 81. 
If  the  municipality  shall  have  determined  to  acquire  an 
existing  plant  in  the  manner  provided  in  the  preceding 
section,  and  the  public  utility  owning  such  plant  shall 
have  consented  to  the  taking  over  of  such  plant  by  the 
municipality  by  acceptance  of  an  indeterminate  permit 
as  provided  herein,  or,  in  case  such  public  utility  shall 
not  have  waived  or  consented  to  such  taking,  if  the 
jury  shall  have  found  that  a  necessity  exists  for  the 
taking  of  such  plant,  then  the  municipality  shall  give 
speedy  notice  of  such  determination  and  of  such  con- 
sent or  such  verdict  of  a  jury  to  the  public  utility  and 
to  the  commission. 

Ch.  499,  1907;  ch.  213,  1909. 

Compensation  to  be  determined  by  commission; 
notice.  Section  1797m — 82.  The  commission  shall 
thereupon  proceed  to  set  a  time  and  place  for  a  public 
hearing  upon  the  matters  of  the  just  compensation  to  be 
paid  for  the  taking  of  the  property  of  such  public  utility 
actually  v^ed  and  useful  for  the  convenience  of  the  public, 
and  of  all  other  terms  and  conditions  of  the  purchase,  and 


WISCONSIN  LAW.  833 

sale,  and  shall  give  to  the  municipality  and  the  public 
utility  interested,  not  less  tlian  thirty  days  notice  of  the 
time  and  place  when  and  where  such  hearing  will  he  Iveld, 
and  such  matters  considered  and  determined,  and  sJiaU  give 
like  notice  to  all  bondholders,  mortgagees,  lienors,  and  all 
ether  persons  having  or  claiming  to  Imve  any  interest  in  such 
public  utility,  by  publication  of  such  notice  once  a  week  for 
not  less  than  three  successive  weeks  in  at  least  one  news- 
paper of  general  circulation  printed  in  the  English  language 
and  published  in  the  county  in  which  such  public  utility 
is  located,  which  publication  shall  be  caused  to  be  made  by 
the  municipality.  Within  a  reasonable  time,  not  exceeding 
one  year,  after  the  time  fixed  for  such  hearing  in  such 
notice,  the  commission  shall,  by  order,  fix  and  determine 
and  certify  to  the  municipal  council,  to  the  public  utility 
and  to  any  bondholder,  mortgagee,  lienor  or  other  creditor 
appearing  upon  such  hearing,  just  compensation  to  be 
paid  for  the  taking  of  the  property  of  such  public  util- 
ity actually  used  and  useful  for  the  convenience  of  the 
public  and  all  other  terms  and  all  conditions  of  sale 
and  purchase  which  it  shall  ascertain  to  be  reasonable. 
The  compensation  and  other  terms  and  the  conditions 
of  sale  and  purchase  thus  certified  by  the  commission 
shall  constitute  the  compensation  and  terms  and  con- 
ditions to  be  paid,  followed,  and  observed  in  the 
purchase  of  such  plant  from  such  public  utility.  Upon 
the  filing  of  such  certificate  with  the  clerk  of  such 
municipality  the  exclusive  use  of  the  property  taken 
shall  vest  in  such  municipality. 

Ch.  499,  1907;  ch.  662,  1911. 

Appeal.  Section  1797m — 83.  Any  public  utility 
or  the  municipality  or  any  bondholder,  mortgagee,  liencr 
or  other  creditor  of  the  public  utility,  being  dissatisfied 
with  such  order,  may  commence  and  prosecute  an 
action  in  the  circuit  court  to  alter  or  amend  such  order 

53— Pub.  Ut. 


834  PUBLIC   UTILITIES. 

or  any  part  thereof,  as  provided  in  sections  1797m — 64 
to    1797m — 773   inclusive,  and  said  sections  so  far  as 
applicable  shall  apply  to  such  action. 
Ch.  499,  1907;  ch.  662,  191 1. 

If  decision  affirmed.  Section  1797m — 84.  If  the 
plaintiff  shall  not  establish  to  the  full  satisfaction  of  the 
court  that  the  compensation  fixed  and  determined  in 
such  order  is  unlawful  or  that  some  of  the  terms  or 
conditions  fixed  and  determined  therein  are  in  some 
particulars  unreasonable,  the  compensation,  terms  and 
conditions  fixed  in  said  order  shall  be  the  compensa- 
tion, terms  and  conditions  to  be  paid,  followed  and 
observed  in  the  purchase  of  said  plant  from  such  pub- 
lic utility. 

Ch.  499,   1907. 

If  decision  for  utility.  Section  1797m — 85.  If  the 
plaintiff  shall  estabHsh  to  the  full  satisfaction  of  the 
court  and  the  court  shall  adjudge  that  such  compen- 
sation is  unlawful  or  that  some  of  such  terms  or  con- 
ditions are  unreasonable,  the  court  shall  remand  the 
same  to  the  commission  with  such  findings  of  fact 
and  conclusions  of  law  as  shall  set  forth  in  detail  the 
reasons  for  such  judgment  and  the  specific  particulars 
in  which  such  order  of  the  commission  is  adjudged  to 
be  unreasonable  or  unlawful. 
Ch.  499,  1907. 

Reconsideration  of  compensation.  Section  1797m 
— 86.  I.  If  the  compensation  fixed  by  the  previous 
order  of  the  commission  be  adjudged  to  be  unlawful, 
the  commission  shall  forthwith  proceed  to  set  a  re- 
hearing for  the  re-determination  of  such  compensation 
as  in  the  first  instance. 

2.  The  commission  shall  forthwith  otherwise  alter 
and  amend  such  previous  order  with  or  without  a  re- 


WISCONSIN   LAW.  835 

hearing  as   it   may   deem   necessary   so   that   the   same 
shall  be  reasonable  and  lawful  in  every  particular. 
Ch.  499,   1907. 

Power  of  councils  to  regulate  utilities;  appeal. 
Section  1797m — 87.  Every  municipal  council  shall 
have  power:  (i.)  To  determine  by  contract,  ordi- 
nance or  otherwise  the  quality  and  character  of  each 
kind  of  product  or  service  to  be  furnished  or  rendered 
by  any  public  utility  furnishing  any  product  or  service 
within  said  municipality  and  all  other  terms  and  con- 
ditions not  inconsistent  with  this  act  upon  which  such 
public  utility  may  be  permitted  to  occupy  the  streets, 
highways  or  other  public  property  within  such  mu- 
nicipality and  such  contract,  ordinance  or  other  deter- 
mination of  such  municipality  shall  be  in  force  and 
prima  facie  reasonable.  Upon  complaint  made  by  such 
public  utility  or  by  any  qualified  complainant  as  pro- 
vided in  section  1797m — 43,  the  commission  shall  set 
a  hearing  as  provided  in  sections  1797m — 45  and 
1797m — 46  and  if  it  shall  find  such  contract,  ordinance 
or  other  determination  to  be  unreasonable,  such  con- 
tract, ordinance  or  other  determination  shall  be  void. 

(2.)  To  require  of  any  public  utility  by  ordinance 
or  otherwise  such  additions  and  extensions  to  its  physi- 
cal plant  within  said  municipality  as  shall  be  reason- 
able and  necessary  in  the  interest  of  the  public,  and  to 
designate  the  location  and  nature  of  all  such  additions 
and  extensions,  the  time  within  which  they  must  be 
completed  and  all  conditions  under  which  they  must 
be  constructed  subject  to  review  by  the  commission 
as  provided  in  subdivision  i  of  this  section. 

(3.)  To  provide  for  a  penalty  for  non-compliance 
with  the  provisions  of  any  ordinance  or  resolution 
adopted  pursuant  to  the  provisions  hereof. 

(4.)     The  power  and  authority  granted  in  this  sec- 


836  PUBLIC   UTILITIES. 

tion   shall   exist   and   be   vested   in   said   municipalities 
anything  in  this  act  to  the  contrary  notwithstanding. 
Ch.  499,   1907. 

Franks  and  privileges  to  political  committees  and 
candidates;  penalty.  Section  1797m — 88.  (i.)  No 
public  utility  or  any  agent  or  officer  thereof,  or  any 
agent  or  officer  of  any  municipality  constituting  a 
pubhc  utility  as  defined  in  this  act  shall  offer  or  give 
for  any  purpose  to  any  political  committee  or  any 
member  or  employee  thereof,  to  any  candidate  for  or 
incumbent  of,  any  office  or  position  under  the  consti- 
tution or  laws  or  under  any  ordinance  of  any  munici- 
pality of  this  state,  or  to  any  person  at  the  request,  or 
for  the  advantage  of  all  or  any  of  them,  any  frank  or 
any  privilege  withheld  from  any  person  for  any  prod- 
uct or  service  produced,  transmitted,  delivered,  fur- 
nished or  rendered,  or  to  be  produced,  transmitted, 
delivered,  furnished  or  rendered  by  any  public  utility, 
or  the  conveyance  of  any  telephone  message  or  com- 
munication or  any  free  product  or  service  whatsoever. 

(2.)  No  political  committee  and  no  member  or 
employee  thereof,  no  candidate  for  and  no  incumbent 
of  any  office  or  position  under  the  constitution  or  laws 
or  under  any  ordinance  of  any  town  or  municipality 
of  this  state,  shall  ask  for  or  accept  from  any  public 
utility  or  any  agent  or  officer  thereof,  or  any  agent  or 
officer  of  any  municipality  constituting  a  public  utihty 
as  defined  in  this  act,  or  use  in  any  manner  or  for  any 
purpose  any  frank  or  privilege  withheld  from  any 
person,  for  any  product  or  service  produced,  trans- 
mitted, dehvered,  furnished  or  rendered  or  to  be  pro- 
duced, transmitted,  delivered,  furnished  or  rendered 
by  any  public  utility,  or  the  conveyance  of  any  tele- 
phone message  or  communication. 

(3.)     Any    violation    of    any    of    the    provisions    of 


WISCONSIN   LAW.  837 

this  section  shall  be  punished  by  imprisonment  in  the 
state   prison  not  more  than  five  years   nor  less  than 
one  year  or  by  fine  not  exceeding  one  thousand  dol- 
lars nor  less  than  two  hundred  dollars. 
Ch.  499,   1907. 

Unjust  discrimination;  definition  and  penalty.  Sec- 
tion 1797m — 89.  I.  If  any  public  utility  or  any  agent 
or  officer  thereof,  or  an  officer  of  any  municipality 
constituting  a  public  utility  as  defined  in  this  act  shall, 
directly  or  indirectly,  by  any  device  whatsoever  or 
otherwise,  charge,  demand,  collect  or  receive  from 
any  person,  firm  or  corporation  a  greater  or  less  com- 
pensation for  any  service  rendered  or  to  be  rendered 
by  it  in  or  affecting  or  relating  to  the  production, 
transmission,  delivery  or  furnishing  of  heat,  light, 
water  or  power  or  the  conveyance  of  telephone  mes- 
sages or  for  any  service  in  connection  therewith  than 
that  prescribed  in  the  published  schedules  or  tariffs 
then  in  force  or  establish  as  provided  herein,  or  than 
it  charges,  demands,  collects  or  receives  from  any 
other  person,  firm  or  corporation  for  a  like  and  con- 
temporaneous service,  such  public  utility  shall  be 
deemed  guilty  of  unjust  discrimination  which  is  hereby 
prohibited  and  declared  to  be  unlawful,  and  upon 
conviction  thereof  shall  forfeit  and  pay  into  the  state 
treasury  not  less  than  one  hundred  dollars  nor  more 
than  one  thousand  dollars  for  each  offense;  and  such 
agent  or  officer  so  offending  shall  be  deemed  guilty  of 
a  misdemeanor  and  upon  conviction  thereof  shall  be 
punished  by  a  fine  of  not  less  than  fifty  dollars  nor 
more  than  one  hundred  dollars  for  each  offense. 
Ch.  499,   1907. 

Facilities  in  exchange  for  less  compensation,  pro- 
hibited; exceptions.  Section  1797m — 90.  It  shall  be 
unlawful  for  any  public  utility  to  demand,  charge,  col- 


838  PUBLIC   UTILITIES. 

lect  or  receive  from  any  person,  firm  or  corporation 
less  compensation  for  any  service  rendered  or  to  be 
rendered  by  said  public  utility  in  consideration  of 
the  furnishing  by  said  person,  firm  or  corporation  of 
any  part  of  the  facilities  incident  thereto;  provided 
nothing  herein  shall  be  construed  as  prohibiting  any 
public  utility  from  renting  any  facilities  incident  to 
the  production,  transmission,  delivery  or  furnishing 
of  heat,  light,  water  or  pov^^er  or  the  conveyance  of 
telephone  messages  and  paying  a  reasonable  rental 
therefor,  or  as  requiring  any  public  utility  to  furnish 
any  part  of  such  appliances  which  are  situated  in  and 
upon  the  premises  of  any  consumer  or  user,  except 
telephone  station  equipment  upon  the  subscribers' 
premises,  and  unless  otherwise  ordered  by  the  com- 
mission meters  and  appliances  for  measurements  of 
any  product  or  service. 

Ch.  499,  1907;  ch.  213,   1909. 

Discriminations;  undue  preference;  penalty.  Sec- 
tion 1797m — 91.  If  any  public  utility  make  or  give 
any  undue  or  unreasonable  preference  or  advantage 
to  any  particular  person,  firm  or  corporation  or  shall 
subject  any  particular  person,  firm  or  corporation  to 
any  undue  or  unreasonable  prejudice  or  disadvantage 
in  any  respect  whatsoever,  such  public  utility  shall  be 
deemed  guilty  of  unjust  discrimination  which  is  here- 
by prohibited  and  declared  unlawful. 

Exceptions.  The  furnishing  by  any  public  utility, 
of  any  product  or  service  at  the  rates  and  upon  the 
terms  and  conditions  provided  for  in  any  existing  con- 
tract executed  prior  to  April  i,  1907,  shall  not  consti- 
tute a  discrimination  within  the  meaning  specified. 
Any  person,  firm  or  corporation  violating  the  provi- 
sions of  this  section  shall  be  deemed  guilty  of  a  mis- 
demeanor and  on  conviction  thereof  shall  be  punished 


WISCONSIN   LAW.  839 

by  a  line  of  not  less  than  lifty  dollars  nor  more  than 
one  thousand  dollars  for  each  offense. 
Ch.  499,   1907. 

Rebates,  concessions  and  discriminations;  penalty. 
Section  1797m — 92.  It  shall  be  unlawful  for  any  per- 
son, firm  or  corporation  knowingly  to  solicit,  accept 
or  receive  any  rebate,  concession  or  discrimination  in 
respect  to  any  service  in  or  affecting  or  relating  to 
the  production,  transmission,  delivery  or  furnishing 
of  heat,  light,  water  or  power  or  the  conveying  of  tele- 
phone messages  within  this  state,  or  for  any  service  in 
connection  therewith  whereby  any  such  service  shall, 
by  any  device  whatsoever,  or  otherwise,  be  rendered 
free  or  at  a  less  rate  than  that  named  in  the  published 
schedules  and  tariffs  in  force  as  provided  herein,  or 
whereby  any  service  or  advantage  is  received  other 
than  is  herein  specified.  Any  person,  firm  or  corpora- 
tion violating  the  provisions  of  this  section  shall  be 
deemed  guilty  of  a  misdemeanor  and  on  conviction 
thereof  shall  be  punished  by  a  fine  of  not  less  than 
fifty  dollars  nor  more  than  one  thousand  dollars  for 
each  offense. 

Ch.  499,   1907. 

Utilities,  liability  for  damages.  Section  1797m — 
93.  If  any  public  utility  shall  do  or  cause  to  be  done 
or  permit  to  be  done  any  matter,  act  or  thing  in  this 
act  prohibited  or  declared  to  be  unlawful,  or  shall  omit 
to  do  any  act,  matter  or  thing  required  to  be  done 
by  it,  such  public  utility  shall  be  liable  to  the  person, 
firm  or  corporation  injured  thereby  in  treble  the 
amount  of  damages  sustained  in  consequence  of  such 
violation ;  provided,  that  any  recovery  as  in  this  sec- 
tion provided,  shall  in  no  manner  affect  a  recovery  by 
the  state  of  the  penalty  prescribed  for  such  violation. 
Ch.  499.   1907. 


840  PUBLIC  UTILITIES. 

Information,  papers  and  accounting;  delinquency 
penal.  Section  1797m — 94.  Any  officer,  agent  or  em- 
ployee of  any  public  utility  or  of  any  municipality 
constituting  a  public  utility  as  defined  in  this  act  who 
shall  fail  or  refuse  to  fill  out  and  return  any  blanks 
as  required  by  this  act,  or  shall  fail  or  refuse  to  answer 
any  question  therein  propounded,  or  shall  knowingly 
or  wilfully  give  a  false  answer  to  any  such  question 
or  shall  evade  the  answer  to  any  such  question  where 
the  fact  inquired  of  is  within  his  knowledge  or  who 
shall,  upon  proper  demand,  fail  or  refuse  to  exhibit  to 
the  commission  or  any  commissioner  or  any  person 
authorized  to  examine  the  same,  any  book,  paper, 
account,  record,  or  memoranda  of  such  public  utility 
which  is  in  his  possession  or  under  his  control  or  who 
shall  fail  to  properly  use  and  keep  his  system  of  ac- 
count, record,  or  memoranda  of  such  pubHc  utility 
which  is  in  his  possession  or  under  his  control  or  who 
shall  fail  to  properly  use  and  keep  his  system  of  ac- 
counting or  any  part  thereof  as  prescribed  by  the 
commission,  or  who  shall  refuse  to  do  any  act  or  thing 
in  connection  with  such  system  of  accounting  when 
so  directed  by  the  commission  or  its  authorized  repre- 
sentative, shall  be  deemed  guilty  of  a  misdemeanor 
and  upon  conviction  thereof  shall  be  punished  by  a 
fine  of  not  less  than  one  thousand  dollars  for  each 
offense. 

(2.)  And  a  penalty  of  not  less  than  five  hundred 
dollars  nor  more  than  one  thousand  dollars  shall  be 
recovered  from  the  public  utility  for  each  such  of- 
fense when  such  officer,  agent  or  employee  acted  in 
obedience  to  the  direction,  instruction  or  request  of 
such  public  utility  or  any  general  officer  thereof. 
Ch.  499,   1907. 

Violations  in  general,  penalty;  utility  responsible 
for    agents.     Section     1797m — 95.     i.     If    any    public 


WISCONSIN   LAW.  84I 

Utility  shall  violate  any  provisions  of  this  act,  or  shall 
do  any  act  herein  prohibited  or  shall  fail  or  refuse  to 
perform  any  duty  enjoined  upon  it  for  which  a  penalty 
has  not  been  provided,  or  shall  fail,  neglect  or  refuse 
to  obey  any  lawful  requirement  or  order  made  by  the 
commission  or  the  municipal  council  or  any  judgment 
or  decree  made  by  any  court  upon  its  application,  for 
every  such  violation,  failure  or  refusal  such  pub- 
lic utility  shall  forfeit  and  pay  into  the  treasury  a  sum 
not  less  than  one  hundred  dollars  nor  more  than  one 
thousand  dollars  for  each  offense. 

2.  In  construing  and  enforcing  the  provisions  of 
this  section  the  act,  omission  or  failure  of  any  officer, 
agent  or  other  person  acting  for  or  employed  by  any 
public  utility  acting  within  the  scope  of  his  employ- 
ment shall  in  every  case  be  deemed  to  be  the  act, 
omission  or  failure  of  such  public  utility. 
Ch.  499,   1907. 

Municipal  officers;  delinquency,  penalty.  Section 
1797m — 96.  If  any  officer  of  any  town,  village  or  city 
constituting  a  public  utility  as  defined  in  this  act  shall 
do  or  cause  to  be  done  or  permit  to  be  done  any  mat- 
ter, act  or  thing  in  this  act  prohibited  or  declared  to 
be  unlawful,  or  shall  omit,  fail,  neglect  or  refuse  to  do 
any  act,  matter  or  thing  required  by  this  act  of  such 
officer  to  be  done,  or  shall  omit,  fail,  neglect  or  refuse 
to  perform  any  duty  enjoined  upon  him  and  relating 
directly  or  indirectly  to  the  enforcement  of  this  act, 
or  shall  omit,  fail,  neglect  or  refuse  to  obey  any  lawful 
requirement  or  order  made  by  the  commission  or  any 
judgment  or  decree  made  by  the  court  upon  its  appli- 
cation, for  every  such  violation,  failure  or  refusal  such 
officer  shall  be  deemed  guilty  of  a  misdemeanor  and 
upon  conviction  thereof  shall  be  punished  by  a  fine  of 


842  PUBLIC  UTILITIES. 

not  less  than  fifty  dollars  nor  more  than  five  hundred 
dollars. 

Ch.  499,  1907. 

Interference  with  commission's  equipment;  penalty. 
Section  1797m — 97.  i.  Any  person  who  shall  de- 
stroy, injure  or  interfere  with  any  apparatus  or  appli- 
ance owned  or  operated  by  or  in  charge  of  the  com- 
mission or  its  agent  shall  be  deemed  guilty  of  a  mis- 
demeanor and  upon  conviction  shall  be  punished  by 
fine  not  exceeding  one  hundred  dollars  or  imprison- 
ment for  a  period  not  exceeding  thirty  days  or  both. 

2.     Any   public   utility   permitting   the    destruction, 
injury  to,  or  interference  with,  any  such  apparatus  or 
appliance,  shall  forfeit  a  sum  not  exceeding  one  thou- 
sand dollars  for  each  offense. 
Ch.  499,   1907. 

What  constitutes  a  separate  and  distinct  violation. 

Section  1797m — 98.  Every  day  during  which  any 
public  utility  or  any  officer,  agent  or  employee  thereof 
shall  fail  to  observe  and  comply  with  any  order  or  di- 
rection of  the  commission  or  to  perform  any  duty 
enjoined  by  this  act  shall  constitute  a  separate  and 
distinct  violation  of  such  order  or  direction  or  of  this 
act  as  the  case  may  be. 
Ch.  499,   1907. 

Temporary  alteration  or  suspension  of  rates.  Sec- 
tion 1797m — 99.  I.  The  commission  shall  have 
power,  when  deemed  by  it  necessary  to  prevent  injury 
to  the  business  or  interests  of  the  people  or  any  public 
utility  of  this  state  in  case  of  any  emergency  to  be 
judged  of  by  the  commission,  to  temporarily  alter, 
amend,  or  with  the  consent  of  the  public  utility  con- 
cerned, suspend  any  existing  rates,  schedules  and  order 


WISCONSIN   LAW.  843 

relating   to   or   affecting  any    public   utility   or   part   of 
any  public  utility  in  this  state. 

2.  Such  rates  so  made  by  the  commission  shall 
apply  to  one  or  more  of  the  public  utilities  in  this 
state  or  to  any  portion  thereof  as  may  be  directed  by 
the  commission,  and  shall  take  effect  at  such  time  and 
remain  in  force  for  such  length  of  time  as  may  be  pre- 
scribed by  the  commission. 
Ch.  499,   1907. 

Permanent  rate  regulation.  Section  1797m — 100. 
Whenever,  after  hearing  and  investigation  as  pro- 
vided in  this  act,  the  commission  shall  find  that  any 
rate,  toll,  charge,  regulation  or  practice  for,  in,  or 
affecting  or  relating  to  the  production,  transmission, 
delivery  or  furnishing  of  heat,  light,  water  or  power 
or  the  conveying  of  any  telephone  message  or  any 
service  in  connection  therewith  not  hereinbefore  spe- 
cifically designated,  is  unreasonable  or  unjustly  dis- 
criminatory, it  shall  have  the  power  to  regulate  the 
same  as  provided  in  section  1797m — 43  to  1797m — 51 
and  1797m — 60  to  1797m — 62,  inclusive. 
Ch.  499,   1907. 

Accidents  resulting  in  death;  utility  to  report;  in- 
vestigation. Section  1797m — loi.  i.  Every  public 
utility  shall,  whenever  an  accident  attended  with  loss 
of  human  life  occurs  within  this  state  upon  its  premises 
or  directly  or  indirectly  arising  from  or  connected  with 
its  maintenance  or  operation,  give  immediate  notice 
thereof  to  the  commission. 

2.  In  the  event  of  any  such  accident  the  commis- 
sion, if  it  deem  public  interest  require  it,  shall  cause 
an  investigation  to  be  made  forthwith,  which  inves- 
tigation shall  be  held  in  the  locality  of  the  accident, 
unless  for  greater  convenience  of  those   concerned   it 


$44  PUBLIC   UTILITIES. 

shall  order  such  investigation  to  be  held  at  some 
other  place;  and  said  investigation  may  be  adjourned 
from  place  to  place  as  may  be  found  necessary  and 
convenient.  The  commission  shall  seasonably  notify 
the  public  utility  of  the  time  and  place  of  the  inves- 
tigation. 

Ch.  499,  1907. 

Enforcement,  aid;  attorney  general's  duty;  prose- 
cutions; court  jurisdiction.  Section  1797m — 102.  i. 
The  commission  shall  inquire  into  any  neglect  or  vio- 
lation of  the  laws  of  this  state  by  any  public  utility 
doing  business  therein,  or  by  the  officers,  agents  or 
employees  thereof  or  by  any  person  operating  the 
plant  of  any  public  utility,  and  shall  have  the  power 
and  it  shall  be  its  duty  to  enforce  the  provisions  of 
this  act  as  well  as  all  other  laws  relating  to  public 
utilities,  and  to  report  all  violations  thereof  to  the 
attorney  general. 

2.  Upon  the  request  of  the  commission  it  shall 
be  the  duty  of  the  attorney  general  or  the  district 
attorney  of  the  proper  county  to  aid  in  any  investiga- 
tion, hearing  or  trial  had  under  the  provisions  of  this 
act,  and  to  institute  and  prosecute  all  necessary  actions  * 
or  proceedings  for  the  enforcement  of  this  act  and  of 
all  other  laws  of  this  state  relating  to  public  utilities 
and  for  the  punishment  of  all  violations  thereof. 

3.  Any  forfeiture  or  penalty  herein  provided  shall 
he  recovered  and  suit  therein  shall  be  brought  in  the 
name  of  the  state  of  Wisconsin  in  the  circuit  court 
for  Dane  county.  Complaint  for  the  collection  of  any 
such  forfeiture  may  be  made  by  the  commission  or 
any  member  thereof,  and  when  so  made  the  action  so 
commenced  shall  be  prosecuted  by  the  attorney  gen- 
eral. 

4.  The  commission  shall  have  authority  to  employ 


WISCONSIN    LAW.  845 

counsel    in    an}'    proceeding,    investigation,    hearing    or 
trial. 

Ch.  499,   1907. 

Commission's  acts;  technical  omissions.  Section 
1797m — 103.  A  substantial  compliance  with  the  re- 
quirements of  this  act  shall  be  sufficient  to  give  effect 
to  all  the  rules,  orders,  acts  and  regulations  of  the 
commission  and  they  shall  not  be  declared  inoperative, 
illegal  or  void  for  any  omission  of  a  technical  nature 
in  respect  thereto. 

Ch.  499,   1907. 

Other  rights  of  action;  penalties  cumulative.  Sec- 
tion 1797m — 104.  This  act  shall  not  have  the  effect 
to  release  or  waive  any  right  of  action  by  the  state 
or  by  any  person  for  any  right,  penalty  or  forfeiture 
which  may  have  arisen  or  which  may  hereafter  arise, 
under  any  law  of  this  state,  and  all  penalties  and  for- 
feitures accruing  under  this  act  shall  be  cumulative 
and  a  suit  for  any  recovery  of  one  shall  not  be  a  bar 
to  the  recovery  of  any  other  penalty. 
Ch.  499,   1907. 

Rates  of  April,  1907,  to  govern;  reports;  proceed- 
ings to  change.  Section  1797m — 105.  i.  Unless  the 
commission  shall  otherwise  order,  it  shall  be  unlawful 
for  any  public  utility  within  this  state  to  demand,  col- 
lect or  receive  a  greater  compensation  for  any  service 
than  the  charge  fixed  on  the  lowest  schedules  of  rates 
for  the  same  service  on  the  first  day  of  April,   1907. 

2.  Every  public  utility  in  this  state  shall,  within 
thirty  days  after  the  passage  and  publication  of  this 
act,  file  in  the  office  of  the  commission,  copies  of  all 
schedules  of  rates  and  charges  including  joint  rates, 
in  force  on  the  first  day  of  April,  1907.  and  all  rates 
in  force  at  any  time  subsequent  to  said  date. 


846  PUBLIC   UTILITIES. 

3.  Any  public  utility  desiring  to  advance  or  dis- 
continue any  such  rate  or  rates  may  make  application 
to  the  commission  in  writing  stating  the  advance  in 
or  discontinuation  of  the  rate  or  rates  desired,  giving 
the  reasons  for  such  advance  or  discontinuation. 

4.  Upon  receiving  such  application  the  commis- 
sion shall  fix  a  time  and  place  for  hearing  and  give 
such  notice  to  interested  parties  as  it  shall  deem  proper 
and  reasonable.  If,  after  such  hearing  and  investiga- 
tion, the  commission  shall  find  that  the  change  or 
discontinuation  applied  for  is  reasonable,  fair  and  just, 
it  shall  grant  the  application  either  in  whole  or  in  part. 

5.  Any  public  utility  being  dissatisfied  with  any 
order  of  the  commission  made  under  the  provisions  of 
this  section  may  commence  an  action  against  it  in  the 
circuit  court  in  the  manner  provided  in  sections  1797m 
— 64  to  1797m — 73,  inclusive,  of  this  act,  which  action 
shall  be  tried  and  determined  in  the  same  manner  as 
is  provided  in  said  sections. 

Ch.  499,   1907. 

Employees  of  commission.  Section  1797m — 106. 
The  employment  of  agents,  experts,  engineers,  ac- 
countants, examiners  or  assistants  by  the  commission 
as  provided  in  this  act,  and  the  payment  of  their  com- 
pensation and  traveling  and  other  expenses,  shall  be 
under  the  provisions  of  section  i,  chapter  362,  of  the 
laws  of  1905,  and  acts  amendatory  thereof. 

Appropriation.  Section  1797m — 107.  A  sum  suffi- 
cient to  carry  out  the  provisions  of  this  act  is  ap- 
propriated out  of  any  money  in  the  state  treasury  not 
otherwise  appropriated. 

Ch.  499,  1907;  ch.  450,  1909. 

Conflicting  laws  repealed.  Section  1797m — 108. 
All    acts    and   parts   of   acts    conflicting   with   the    pro- 


WISCONSIN    LAW.  847 

visions  of  this  act  are  repealed  in  so  far  as  they  are 
inconsistent  herewith. 
Ch.  499,   1907. 

*Repeal.  Section  925 — 97a,  statutes  of  1898,  chap- 
ter 389,  laws  of  1905,  and  chapter  459,  laws  of  1905, 
are  repealed. 

Ch.  499,   1907. 

Railroad  commission:  notices;  certification.  Sec- 
tion 1797m — 109.  Whenever  the  Railroad  Commis- 
sion of  Wisconsin  is  required  to  issue  notices  of  inves- 
tigations, notices  of  hearing  or  to  certify  to  copies  of 
the  records  of  the  Commission,  such  notices  of  certifi- 
cation may  be  issued  by  any  member  of  the  Commis- 
sion or  by  the  Secretary  of  the  Commission. 

All  acts  or  parts  of  acts  conflicting  with  any  pro- 
visions of  this  act  are  repealed  in  so  far  as  they  are 
inconsistent  therewith. 
Ch.  248,  1909. 

*Not  included  in  section. 


848  PUBLIC   UTILITIES. 


APPENDIX  C. 

PUBLIC  UTILITIES  LAW  OF  INDIANA. 
CHAPTER  76,  ACTS  1913. 

Approved,  March  4,  1913. 

§  I.  Definitions. — Be  it  enacted  by  the  General  As- 
sembly of  the  State  of  Indiana,  That  the  term  "public 
utility"  as  used  in  this  act  shall  mean  and  embrace 
every  corporation,  company,  individual,  association  of 
individuals,  their  lessees,  trustees  or  receivers  appoint- 
ed by  any  court  w^hatsoever,  and  every  city  or  town, 
that  now  or  hereafter  may  own,  operate,  manage  or 
control  any  street  railway  or  interurban  railway  or  any 
plant  or  equipment  within  the  state  for  the  conveyance- 
of  telegraph  or  telephone  messages,  or  for  the  produc- 
tion, transmission,  delivery  or  furnishing  of  heat,  light, 
water  or  power,  or  for  the  furnishing  of  elevator  or 
warehouse  service  either  directly  or  indirectly  to  or  for 
the  public. 

The  term  "municipal  council"  as  used  in  this  act 
shall  mean  and  embrace  the  common  council,  the  board 
of  trustees,  or  any  other  governing  body  of  any  town 
or  city  wherein  the  property  of  the  public  utility  or  any 
part  thereof  is  located. 

The  term  "municipality"  as  used  in  this  act  shall 
mean  any  city  or  town  wherein  property  of  a  public 
utility  or  any  part  thereof  is  located. 

The  term  "rate"  as  used  in  this  act  shall  mean  and 
include  every  individual  or  joint  rate,  fare,  toll,  charge. 


INDIANA   LAW.  849- 

rental  or  other  compensation  of  any  public  utility  or 
any  two  or  more  such  individual  or  joint  rates,  fares, 
tolls,  charges,  rentals  or  other  compensations  of  any 
public  utility  or  any  schedule  or  tariff  thereof. 

The  term  "service"  is  used  in  this  act  in  its  broadest 
and  most  inclusive  sense  and  includes  not  only  the  use 
or  accommodation  afforded  consumers  or  patrons,  but 
also  any  product  or  commodity  furnished  by  any  pub- 
lic utility  and  the  plant,  equipment,  apparatus,  appli- 
ances, property  and  facility  employed  by  any  public 
utility  in  performing  any  service  or  in  furnishing  any 
product  or  commodity  and  devoted  to  the  purposes  in 
which  such  public  utility  is  engaged  and  to  the  use  and 
accommodation   of  the   public. 

The  term  "commission"  used  in  this  act  shall  mean 
the  public  service  commission  of  Indiana  hereby  cre- 
ated. 

The  term  "indeterminate  permit"  as  used  in  this  act 
shall  mean  and  include  every  grant,  directly  or  indi- 
rectly, from  the  state  to  any  corporation,  company,  in- 
dividual, association  of  individuals,  their  lessees,  trus- 
tees or  receivers  appointed  by  any  court  whatsoever, 
of  power,  right  or  privilege  to  own,  operate,  manage 
or  control  any  plant  or  equipment,  or  any  part  of  a 
plant  or  equipment,  within  this  state,  for  the  produc- 
tion, transmission,  delivery  or  furnishing  of  heat,  light, 
water  or  power,  either  directly  or  indirectly,  to  or  for 
the  public,  or  for  the  transportation  by  a  street  railway 
or  interurban  of  passengers  or  property  between  points 
within  this  state,  or  for  the  furnishing  of  facilities  for 
the  transmission  of  intelligence  by  electricity  between 
points  within  this  state,  which  shall  continue  in  force  un- 
til such  time  as  the  municipality  shall  exercise  its  option 
to  purchase,  as  provided  in  tliis  act,  or  until  it  shall  be 
otherwise  terminated  according  to  law.     This  act  shall 

54— Pub.  Ut. 


850  PUBLIC   UTILITIES. 

he  commonly  known  and  referred  to  as  the  "Shively-Spencer 
Utility  Cornmission  Act." 

§  2.  Public  service  commission. — The  public  serv- 
ice commission  of  Indiana  shall  consist  of  five  (5) 
members,  not  more  than  three  (3)  of  whom  shall  be 
members  of  the  same  political  party,  appointed  by  the 
governor  for  a  term  of  four  (4)  years.  The  members 
of  the  railroad  commission  of  Indiana  are  hereby  con- 
tinued in  office  as  members  of  the  public  service  com- 
mission until  the  expiration  of  the  terms  for  v^hich  they 
were  appointed,  and  until  their  successors  are  ap- 
pointed and  qualified.  In  the  first  instance  one  of  the 
additional  members  shall  be  appointed  for  two  (2) 
years  and  one  for  four  (4)  years,  and  until  their  suc- 
cessors are  appointed  and  qualified.  Thereafter,  the 
members  shall  be  appointed  for  four  (4)  years,  and 
until  their  successors  are  appointed  and  qualified.  The 
governor  may  fill  any  vacancies  occurring  in  the  board 
for  the  unexpired  term.  Any  member  of  the  commis- 
sion may  be  removed  by  the  governor  for  incompe- 
tency, neglect  of  duty  or  misconduct  in  office  after  no- 
tice and  a  hearing.  No  member  of  the  commission, 
the  general  counsel  or  any  person  appointed  to  any 
position  or  employed  in  any  capacity  by  the  commis- 
sion shall  have  any  official  or  professional  relation  or 
connection  with  or  hold  any  stock  or  securities  or  have 
any  pecuniary  interest  in  any  public  utility  operating  in 
the  State  of  Indiana. 

§  3.  Counsel  for  commission. — The  governor  shall 
appoint  a  general  counsel  for  the  commission  who  shall 
also  serve  as  counsel  to  the  governor.  The  term  of 
office  of  such  counsel  shall  be  four  (4)  years  and  he 
may  be  removed  by  the  governor  for  cause.  The  gen- 
eral counsel  shall  advise  the  commission  in  legal  mat- 


INDIANA   LAW.  85 1 

ters  arising  in  the  discharge  of  their  duties  and  shall 
represent  the  commission  in  all  suits  to  which  the  com- 
mission may  be  a  party. 

The  attorney-general  shall  give  legal  aid  to  the  gen- 
eral counsel  whenever  requested  by  the  governor  or 
the  commission.  The  general  counsel  shall  have  the 
right  to  call  upon  the  prosecuting  attorney  of  any 
county  or  the  legal  officers  of  any  city  to  assist  in  the 
prosecution  of  any  case  in  which  the  commission  may 
be  interested,  and  it  shall  be  the  duty  of  the  prosecut- 
ing attorney  or  any  legal  officer  of  the  city  to  give  such 
assistance  as  may  be  required  by  the  commission,  under 
the  direction  of  the  general  counsel.  The  commission 
may  employ  other  counsel  to  represent  the  commission 
in  any  case  to  which  the  commission  may  be  a  party 
whenever  the  interests  of  the  public  may  require  such 
employment. 

§  4.  Public  service  commission  including  railroad 
commission. — The  rights,  powers  and  duties  conferred 
by  law  on  the  railroad  commission  of  Indiana  are  con- 
tinued in  full  force  and  are  hereby  transferred  to  the 
public  service  commission  hereby  created  and  shall  be 
held  and  exercised  by  them  under  the  laws  heretofore 
in  force,  and  the  railroad  commission  of  Indiana  is 
hereby  abolished.  This  act  shall  not  affect  pending 
actions  or  proceedings  brought  by  or  against  the  peo- 
ple of  the  State  of  Indiana,  or  the  railroad  commission 
of  Indiana,  or  by  any  other  person,  firm  or  corporation 
under  the  provisions  of  the  acts  establishing  or  con- 
ferring power  on  the  railroad  commission  of  Indiana, 
but  the  same  may  be  prosecuted  and  defended  in  the 
name  of  the  public  service  commission  with  the  same 
effect  as  though  this  act  had  not  been  passed.  Any 
investigation,  hearing  or  examination  undertaken,  com- 
menced,  instituted   or   prosecuted   prior   to   the    taking 


852  PUBLIC  UTILITIES. 

effect  of  this  act  may  be  conducted  and  continued  to  a 
final  determination  in  the  same  manner  and  with  the 
same  effect  as  if  this  act  had  not  been  passed:  Pro- 
vided, That  nothing  in  this  act  shall  be  construed  so  as 
to  repeal  any  part  of  the  act  under  authority  of  which 
said  railroad  commission  of  Indiana  was  authorized  or 
of  any  act  amendatory  or  supplemental  thereto,  con- 
ferring power  on  the  railroad  commission  except  such 
as  are  in  direct  conflict  herewith,  it  being  the  intent  of 
this  act  to  substitute  the  public  service  commission  of 
Indiana  for  the  railroad  commission  of  Indiana. 

§  5.  Organization. — The  commission  shall  organize 
within  thirty  (30)  days  after  their  appointment  by 
electing  one  (i)  of  their  number  as  chairman  and  shall 
select  a  secretary  and  a  chief  clerk.  A  majority  shall 
constitute  a  quorum,  but  on  the  order  of  the  commis- 
sion any  one  member  of  the  commission  may  conduct  a 
hearing  or  investigation  and  take  the  evidence  therein, 
and  report  the  same  to  the  commission  for  its  consid- 
eration and  action.  The  salary  of  each  member  of  the 
commission  shall  be  six  thousand  dollars  ($6,000.00)  ; 
of  the  general  counsel,  six  thousand  dollars  ($6,000.00) ; 
of  the  secretary,  three  thousand  six  hundred  dollars 
($3,600.00),  and  of  the  clerk,  three  thousand  dollars 
($3,000.00).  Each  member  of  the  commission  shall 
give  bond  in  the  sum  of  ten  thousand  dollars  ($10,- 
000.00)  for  the  faithful  performance  of  his  duties.  The 
commission  shall  formulate  rules  necessary  to  carry 
out  the  provisions  of  this  act. 

§  6.  Assistants.  —  The  commission  is  authorized, 
with  the  advice  and  consent  of  the  governor,  to  em- 
ploy such  counsel  or  attorneys,  engineers,  examiners, 
experts,  clerks,  accountants  and  other  assistants  as  it 


INDIANA   LAW. 


853 


may  deem  necessary,  at  such  rates  of  compensation  as 
it  may  determine  upon. 

§  7.  Adequate  service  and  reasonable  charges. — 
Every  pubhc  utihty  is  required  to  furnish  reasonably 
adequate  service  and  facilities.  The  charge  made  by 
any  public  utility  for  any  service  rendered  or  to  be 
rendered  either  directly  or  in  connection  therewith 
shall  be  reasonable  and  just,  and  every  unjust  or  unrea- 
sonable charge  for  such  service  is  prohibited  and  de- 
clared unlawful;  Provided,  That  nothing  in  this  act  con- 
tained shall  authorize  any  public  utility  during  the  re- 
mainder of  the  term  of  any  grant  or  franchise  under 
which  it  may  be  acting  at  the  time  this  act  takes  ef- 
fect to  charge  for  any  service  in  such  grant  or  fran- 
chise contracted,  exceeding  the  maximum  rate  or 
rates  therefor,  if  any,  that  may  be  fixed  in  such  grant 
or  franchise. 

§  8.  Facilities  in  common — Physical  connection  be- 
tween telephone  plants — Petition  to  commission. — (a) 
Every  public  utility,  and  every  person,  association  or 
corporation  having  tracks,  conduits,  subways,  poles  or 
other  equipment  on,  over  or  under  any  street  or  high- 
way shall  for  a  reasonable  compensation  permit  the  use 
of  the  same  by  any  public  utility  whenever  public  con- 
venience and  necessity  require  such  use,  and  sucii  use 
will  not  result  in  irreparable  injury  to  the  owner  or 
other  users  of  such  equipment,  nor  in  any  substantial 
detriment  to  the  service  to  be  rendered  by  such  owners 
or  other  users.  Every  public  utility  for  the  convey- 
ance of  telephone  messages  shall  permit  a  physical  con- 
nection or  connections  to  be  made,  and  telephone  serv- 
ice to  be  furnished,  between  any  telephone  system  op- 
erated by  it,  and  the  telephone  toll  line  operated  by 
another  such  public  utility  or  between  its  toll  line  and 


854  PUBLIC   UTILITIES. 

the  telephone  system  of  another  such  pubHc  utiHty,  or 
between  its  toll  line  and  the  toll  line  of  another  such 
public  utility,  or  between  its  telephone  system  and  the 
telephone  system  of  another  such  public  utility,  when- 
ever public  convenience  and  necessity  require  such 
physical  connection  or  connections  and  such  physical 
connection  or  connections  will  not  result  in  irreparable 
injury  to  the  owners  or  other  users  of  the  facilities  of 
such  public  utilities,  nor  in  any  substantial  detriment 
to  the  service  to  be  rendered  by  such  public  utilities. 
The  term  "physical  connection"  as  used  in  this  section 
shall  mean  such  number  of  trunk  lines  or  complete 
wire  circuits  and  connections  as  may  be  required  to 
furnish  reasonably  adequate  telephone  service  between 
such  public  utilities. 

(b)  In  case  of  failure  to  agree  upon  such  use  or  the 
conditions  or  compensation  for  such  use,  or  in  case  of 
failure  to  agree  upon  such  physical  connection,  or  con- 
nections, or  the  terms  and  conditions  upon  which  the 
same  shall  be  made,  any  public  utility  or  any  person, 
association  or  corporation  interested  may  apply  to  the 
commission  and  if  after  investigation  the  commission 
shall  ascertain  that  public  convenience  and  necessity 
require  such  use  or  such  physical  connections,  and  that 
such  use  or  such  physical  connection  or  connections 
would  not  result  in  irreparable  injury  to  the  owner  or 
other  users  of  such  equipment  or  of  the  facilities  of 
such  public  utilities,  nor  in  any  substantial  detriment 
to  the  service  to  be  rendered  by  such  owner  or  such 
public  utilities  or  other  users  of  such  equipment  or 
facilities,  it  shall  by  order  direct  that  such  use  be  per- 
mitted and  prescribe  reasonable  conditions  and  com- 
pensation for  such  joint  use  and  that  such  physical 
connection  or  connections  be  made  and  determine  how 
and  within  what  time  such  connection  or  connections 


INDIANA   LAW.  855 

shall  be  made,  and  by  whom  the  expense  of  making 
and  maintaining  such  connection  or  connections  shall 
be  paid. 

(c)  Such  use  so  ordered  shall  be  permitted  and 
such  physical  connection  or  connections  so  ordered 
shall  be  made  and  such  conditions  and  compensation 
so  prescribed  for  such  use  and  such  terms  and  condi- 
tions upon  which  such  physical  connection  or  connec- 
tions shall  be  made,  so  determined,  shall  be  lawful 
conditions  and  compensation  for  such  use,  and  the  law- 
ful terms  and  conditions  upon  which  such  physical  con- 
nection or  connections  shall  be  made,  to  be  observed, 
followed  and  paid,  subject  to  recourse  to  the  courts 
upon  the  complaint  of  any  interested  party  as  provided 
in  sections  seventy-eight  (78)  to  eighty-six  (86)  in- 
clusive, and  such  sections,  so  far  as  applicable,  shall 
apply  to  any  action  arising  on  such  complaint  so  made. 
Any  such  order  of  the  commission  may  be  from  time 
to  time  revised  by  the  commission  upon  application  of 
any  interested  party  or  upon  its  own  motion. 

§9.  Valuation  of  investment.  —  The  commission 
shall  value  all  the  property  of  every  public  utility  ac- 
tually used  and  useful  for  the  convenience  of  the  pub- 
lic. As  one  of  the  elements  in  such  valuation,  the  com- 
mission shall  give  weight  to  the  reasonable  cost  of 
bringing  the  property  to  its  then  state  of  efficiency. 
In  making  such  valuation,  the  commission  may  avail 
itself  of  any  information  in  possession  of  the  state 
board  of  tax  commissioners  or  of  any  local  authorities. 
The  commission  may  accept  any  valuation  of  the 
physical  property  made  by  the  interstate  commerce 
commission  of  any  public  utility,  subject  to  the  provi- 
sions of  this  act. 

§  10.  Public  hearing  on  valuation. — Before  final  de- 
termination of  such  value,  the  commission  shall,  after 


856  PUBLIC   UTILITIES. 

notice  to  the  public  utility,  hold  a  public  hearing  as  to 
such  valuation  in  the  manner  prescribed  for  a  hearing 
in  sections  fifty-seven  (57)  to  seventy-one  (71)  inclu- 
sive, and  the  provisions  of  such  sections  so  far  as  ap- 
plicable shall  apply  to  such  hearing. 

§  II.     Report    and    statement    of    valuation. — The 

commission  shall,  v^ithin  five  (5)  days  after  such  valua- 
tion is  determined,  serve  a  statement  thereof  upon  the 
public  utility  interested,  and  shall  file  a  like  statement 
with  the  clerk  of  every  municipality  in  which  any  part 
of  the  plant  or  equipment  of  such  public  utility  is  lo- 
cated. 

§  12.  Revaluation. — The  commission  may  at  any 
time  on  its  own  initiative  make  a  revaluation  of  such 
property. 

§  13.  Uniform  system  of  accounting. — Every  pub- 
lic utility  shall  keep  and  render  to  the  commission,  in 
the  manner  and  form  prescribed  by  the  commission, 
uniform  accounts  of  all  business  transacted.  In  formu- 
lating a  system  of  accounting  for  any  class  of  public 
utilities  the  commission  shall  consider  any  system  of 
accounting  established  by  any  federal  law,  commission 
or  department  and  any  system  authorized  by  a  na- 
tional association  of  such  utilities. 

§  14.     Subsidiary  business — System  of  accounting. 

— Every  public  utility  engaged  directly  or  indirectly 
in  any  other  or  subsidiary  business  shall,  if  ordered  by 
the  commission,  keep  and  render  separately  to  the  com- 
mission in  like  manner  and  form,  the  accounts  of  all 
such  business,  in  which  case  all  the  provisions  of  this 
act  shall  apply  with  like  force  and  effect  to  the  books, 
accounts,  papers  and  records  of  such  other  business: 


INDIANA   LAW.  857 

Provided,  Every  public  utility  may,  with  the  consent 
of  the  commission  and  the  proper  local  authorities,  fur- 
nish to  all  patrons  or  persons  applying  therefor  any 
service,  product  or  commodity,  which  it  creates  as  a 
necessary  incident  and  subsidiary  to  its  main  or  pri- 
mary business.  No  such  consent  shall  be  granted  ex- 
cept as  provided  in  section  ninety-seven  (97)  of  this 
act  and  every  such  subsidiary  business  shall  be  subject 
to  all  the  provisions  of  this  act. 

§  15.  Prescribed  forms  of  keeping  books,  accounts 
and  records. — The  commission  shall  prescribe  the  forms 
of  all  books,  accounts,  papers  and  records  required  to 
be  kept,  and  every  public  utility  is  required  to  keep 
and  render  its  books,  accounts,  papers  and  records  ac- 
curately and  faithfully  in  the  manner  and  form  pre- 
scribed by  the  commission  and  to  comply  with  all  di- 
rections of  the  commission  relating  to  such  books,  ac- 
counts, papers  and  records. 

§16.  Blanks  furnished.  —  The  commission  shall 
cause  to  be  prepared  suitable  blanks  for  carrying  out 
the  purposes  of  this  act  and  shall,  when  necessary,  fur- 
nish such  blanks  to  each  public  utility. 

§  17.  Only  books,  accounts  and  records  prescribed 
to  be  kept. — Xo  public  utility  shall  keep  any  other 
books,  accounts,  papers  or  records  of  the  business 
transacted  than  those  prescribed  or  approved  by  the 
commission,  unless  required  by  other  public  authority. 

§  18.  Office  for  records — Removal  from  state — Res- 
ident officials. — Each  public  utility  shall  have  an  office 
in  one  of  the  towns  or  cities  in  this  state  in  which  its 
property  or  some  part  thereof  is  located,  and  shall  keep 
in  said  office  all  books,  accounts,  papers  and  records  as 


858  PUBLIC  UTILITIES. 

shall  be  required  by  the  commission  to  be  kept  within 
the  State.  No  books,  accounts,  papers  or  records  re- 
quired by  the  commission  to  be  kept  within  the  state 
shall  be  at  any  time  removed  from  this  State,  except 
upon  such  conditions  as  may  be  prescribed  by  the  com- 
mission. Every  executive  and  general  officer  and  a 
majority  in  number  of  the  board  of  directors  of  each 
and  every  company  or  association  organized  under  the 
laws  of  the  State  of  Indiana  and  coming  under  the  pro- 
visions of  this  act  shall  be  a  bona  fide  resident  and  cit- 
izen of  the  State  of  Indiana  while  acting  as  such  officer 
or  director. 

§  19.  Balance  sheets  to  be  filed  annually. — The  ac- 
counts shall  be  closed  annually  on  the  30th  day  of  June, 
and  a  balance  sheet  of  that  date  promptly  taken  there- 
from. On  or  before  the  ist  day  of  August  following, 
such  balance  sheet,  together  with  such  other  informa- 
tion as  the  commission  shall  prescribe,  verified  by  an 
officer  of  the  public  utility,  shall  be  filed  with  the  com- 
mission. 

§  20.  Accounts  examined  and  audited. — The  com- 
mission shall  provide  for  the  examination  and  audit  of 
all  accounts,  and  all  items  shall  be  allocated  to  the  ac- 
counts in  the  manner  prescribed  by  the  commission. 

§  21.  Audit  and  inspection. — ^The  agents,  account- 
ants or  examiners  employed  by  the  commission  shall 
have  authority  under  the  direction  of  the  commission 
to  inspect  and  examine  any  and  all  books,  accounts, 
papers,  records  and  memoranda  kept  by  such  public 
utility. 

§  22.  Depreciation  account  and  plant  efficiency. — 
Every  public  utility  shall  carry  a  proper  and  adequate 


INDIANA   LAW.  859 

depreciation  account  whenever  the  commission  after 
investigation  shall  determine  that  such  depreciation  ac- 
count can  be  reasonably  required.  The  commission 
shall  from  time  to  time  ascertain  and  determine  what 
are  the  proper  and  adequate  rates  of  depreciation  of 
the  several  classes  of  property  of  each  public  utility. 
The  rates  shall  be  such  as  will  provide  the  amounts 
required  over  and  above  the  expense  of  maintenance 
to  keep  such  property  in  a  state  of  efficiency  corre- 
sponding to  the  progress  of  the  industry.  Each  public 
utility  shall  conform  its  depreciation  accounts  to  such 
rates  so  ascertained  and  determined  by  the  commission. 
The  commission  may  make  changes  in  such  rates  of 
depreciation  from  time  to  time  as  it  may  find  necessary. 

§23.  Depreciation  regulations.  —  The  commission 
shall  also  prescribe  rules,  regulations  and  forms  of  ac- 
counts regarding  such  depreciation,  which  the  public 
utility  is  required  to  carry  into  effect. 

§  24.  Rates  to  cover  depreciation. — The  commis- 
sion shall  provide  for  such  depreciation  in  fixing  the 
rates,  tolls  and  charges  to  be  paid  by  the  public. 

§  25.  Depreciation  fund. — All  money  thus  provided 
for  shall  be  set  aside  out  of  the  earnings  and  carried  in 
a  depreciation  fund.  The  moneys  in  this  fund  may  be 
expended  for  new  constructions,  extensions  or  addi- 
tions to  the  property  of  such  public  utility  or  invested, 
and  if  invested,  the  income  from  the  investment  shall 
also  be  carried  in  the  depreciation  fund.  This  fund  and 
the  proceeds  thereof  shall  be  used  for  no  other  pur- 
poses than  as  provided  in  this  section  and  for  deprecia- 
tion. But  in  no  event  shall  the  moneys  expended  from 
the  fund  for  new  constructions,  extensions  or  additions 
to  the  property  be  credited  to  or  considered  a  part  of 


86o  PUBLIC   UTILITIES. 

the  capital  account  of  any  public  utility,  but  shall  al- 
ways be  charged  against  the  depreciation  fund. 

§  26.  Construction  account. — The  commission  shall 
keep  itself  informed  of  all  new  construction,  extensions 
and  additions  to  the  property  of  such  public  utility  and 
shall  prescribe  the  necessary  forms,  regulations  and  in- 
structions to  the  officers  and  employes  of  such  public 
utility  for  the  keeping  of  construction  accounts  which 
shall  clearly  distinguish  all  operating  expenses  and 
new  construction. 

§  2j.  Sliding  scale  of  rates  on  approval  of  commis- 
sion.— Nothing  in  this  act  shall  be  taken  to  prohibit  a 
public  utility  from  entering  into  any  reasonable  ar- 
rangement with  its  customers  or  consumers  or  with  its 
employes,  or  with  any  municipality  in  which  any  of  its 
property  is  located,  for  the  division  or  distribution  of 
its  surplus  profits  or  providing  for  a  sliding  scale  of 
charges  or  other  financial  device  that  may  be  practica- 
ble and  advantageous  to  the  parties  interested.  No 
such  arrangement  or  device  shall  be  lawful  until  it  shall 
be  found  by  the  commission,  after  investigation,  to  be 
reasonable  and  just  and  not  inconsistent  with  the  pur- 
pose of  this  act.  Such  arrangement  shall  be  under  the 
supervision  and  regulation  of  the  commission. 

§  28.  Rate  regulations  subject  to  change.  —  The 
commission  shall  ascertain,  determine  and  order  such 
rates,  charges  and  regulations  as  may  be  necessary  to 
give  effect  to  such  arrangement,  but  the  right  and 
power  to  make  such  other  and  further  changes  in  rates, 
charges  and  regulations  as  the  commission  may  ascer- 
tain and  determine  to  be  necessary  and  reasonable  and 
the  right  to  revoke  its  approval  and  amend  or  rescind 
all  orders  relative  thereto  is  reserved  and  vested  in  the 


INDIANA  LAW.  86l 

commission,    notwithstanding    any    such    arrangement 
and  mutual  agreement. 

§  29.  Itemized  detailed  report. — Each  public  utility 
shall  furnish  to  the  commission,  in  such  form  and  at 
such  time  as  the  commission  shall  require,  such  ac- 
counts, reports  and  information  as  will  show  in  item- 
ized detail:  (i)  The  depreciation  per  unit,  (2)  the 
salaries  and  wages  separately  per  unit,  (3)  legal  ex- 
penses per  unit,  (4)  taxes  and  rentals  separately  per 
unit,  (5)  the  quantity  and  value  of  material  used  per 
unit,  (6)  the  receipts  from  residuals,  by-products,  serv- 
ices or  other  sales,  separately  per  unit,  (7)  the  total 
and  net  cost  per  unit,  (8)  the  gross  and  net  profit  per 
unit,  (9)  the  dividends  and  interest  per  unit,  (10)  sur- 
plus or  reserve  per  unit,  (11)  the  prices  per  unit  paid 
by  consumer,  and  in  addition  such  other  items,  whether 
of  a  nature  similar  to  those  hereinbefore  enumerated 
or  otherwise  as  the  commission  may  prescribe  in  order 
to  show  completely  and  in  detail  the  entire  operation 
of  the  public  utility  in  furnishing  the  unit  of  its  product 
or  service  for  the  public. 

§  30.  Annual  report  of  commission. — The  commis- 
sion shall  publish  annual  reports  showing  its  proceed- 
ings and  showing  in  tabular  form  the  details  per  unit 
as  provided  in  section  29  for  all  the  public  utilities  of 
each  kind  in  the  state  and  such  monthly  or  occasional 
reports  as  it  may  deem  advisable.  The  cost  of  printing 
all  such  reports  shall  be  paid  by  the  board  of  public 
printing,  binding  and  stationery. 

§  31.  Report  of  valuations  of  investments. — The 
commission  shall  also  publish  in  its  annual  reports  the 
value  of  all  the  property  actually  used  and  useful  for 
the   convenience  of  the   public,   and  the   value   of   the 


862  PUBLIC   UTILITIES. 

physical  property  actually  used  and  useful  for  the  con- 
venience of  the  public,  of  every  public  utility  the  value 
of  whose  property  has  been  ascertained  by  it  under 
sections  9  to  11. 

§  32.     Reports    and    records    public    property. — All 

facts  and  information  in  the  possession  of  the  commis- 
sion shall  be  public  and  all  reports,  records,  files,  books, 
accounts,  papers  and  memoranda  of  every  nature  what- 
soever in  their  possession  shall  be  open  to  inspection 
by  the  public  at  all  reasonable  times,  except  as  pro- 
vided in  section  33. 

§  33.  Temporary  secrecy  for  public  benefit. — When- 
ever the  commission  shall  determine  it  to  be  necessary 
in  the  interest  of  the  public  to  withhold  from  the  pub- 
lic any  facts  or  information  in  its  possession,  such  facts 
may  be  withheld  for  such  period  after  the  acquisition 
thereof,  not  exceeding  ninety  days,  as  the  commission 
may  determine. 

§  34.  Limitations  on  secrecy  of  commission  data. — 
No  facts  or  information  shall  be  withheld  by  the  com- 
mission from  the  public  for  a  longer  period  than  ninety 
days,  nor  be  so  withheld  for  any  reason  whatsoever 
other  than  the  interest  of  the  public. 

§  35.     Prescribed  units  of  product  or  service. — The 

commission  shall  ascertain  and  prescribe  for  each  kind 
of  public  utility  suitable  and  convenient  standard  com- 
mercial units  of  product  or  service.  These  shall  be 
lawful  units  for  the  purpose  of  this  act. 

§  36.  Standard  measurements  of  service. — The  com- 
mission shall  ascertain  and  fix  adequate  and  serviceable 
standards  for  the  measurement  of  quality,  pressure,  in- 


I 


INDIANA   LAW.  863 

itial  voltage,  or  other  conditions  pertaining  to  the  sup- 
ply of  the  product  or  service  rendered  by  any  public 
utility  and  prescribe  reasonable  regulations  for  exami- 
nations and  testing  of  such  product  or  service  and  for 
the  measurement  thereof. 

§  37.  Reasonable  regulations  for  accuracy.  —  The 
commission  shall  establish  reasonable  rules,  regula- 
tions, specifications  and  standards  to  secure  the  accu- 
racy of  all  meters  and  appliances  for  measurements, 
and  every  public  utility  is  required  to  carry  into  effect 
all  orders  issued  by  the  commission  relative  thereto. 
Nothing  contained  in  this  section  shall  limit  in  any 
manner  any  powers  or  authority  vested  in  municipal 
corporations  as  provided  in  section   no. 

§  38.     Measuring  appliances  tested  for  accuracy. — 

The  commission  shall  provide  for  the  examination  and 
testing  of  any  and  all  appliances  used  for  the  measur- 
ing of  any  product  or  service  of  a  public  utility.  Any 
consumer  or  user  may  have  any  such  appliance  tested 
upon  payment  of  the  fees  fixed  by  the  commission. 
The  commission  shall  declare  and  establish  reasonable 
fees  to  be  paid  for  testing  such  appliances  on  the  re- 
quest of  the  consumers  or  users,  the  fee  to  be  paid  by 
the  consumer  or  user  at  the  time  of  his  request,  but 
to  be  paid  by  the  public  utility  and  repaid  to  the  con- 
sumer or  user  if  the  appliance  or  rate  be  found  unrea- 
sonably defective  or  incorrect  to  the  disadvantage  of 
the  consumer  or  user. 

§  39.  Public  measuring  appliances. — The  commis- 
sion may  purchase  such  material,  apparatus  and  stand- 
ard measuring  instruments  for  such  examinations  and 
tests  as  it  may  deem  necessary. 


864  PUBLIC   UTILITIES. 

§  40.  Right  to  enter  premises  to  make  tests. — The 
commission,  its  agents,  experts  or  examiners  shall  have 
power  to  enter  upon  any  premises  occupied  by  any 
public  utihty  for  the  purpose  of  making  the  examina- 
tions and  tests  provided  in  this  act  and  to  set  up  and 
use  on  such  premises  any  apparatus  and  appliances  and 
occupy  reasonable  space  therefor. 

§  41.  Schedules  of  rates  to  be  public. — Every  pub- 
lic utility  shall  file  v^ith  the  commission,  within  a  time 
fixed  by  the  commission,  schedules  which  shall  be  open 
to  public  inspection,  showing  all  rates,  tolls  and  charges 
which  it  has  established  and  which  are  enforced  at  the 
time  for  any  service  performed  by  it  within  the  State, 
or  for  any  service  in  connection  therewith,  or  per- 
formed by  any  public  utility  controlled  or  operated  by 
it.  The  rates,  tolls  and  charges  shown  on  such  sched- 
ules shall  not  exceed  without  the  consent  of  the  com- 
mission the  rates,  tolls  and  charges  in  force  January  i, 
1913- 

§  42.     Rate  rulings  and  regulations  to  be  filed. — 

Every  public  utility  shall  file  with  and  as  a  part  of 
such  schedule  all  rules  and  regulations  that  in  any  man- 
ner affect  the  rates  charged  or  to  be  charged  for  any 
service. 

§  43.  Schedules  of  rates  to  be  printed  and  posted. 
— A  copy  of  so  much  of  said  schedule  as  the  commis- 
sion shall  deem  necessary  for  the  use  of  the  public  shall 
be  printed  in  plain  type,  and  kept  on  file  in  every  sta- 
tion or  office  of  such  public  utility  where  payments  are 
made  by  the  consumers  or  users,  open  to  the  pubhc  in 
such  form  and  place  as  to  be  readily  accessible  to  the 
public  and  as  can  be  conveniently  inspected. 


INDIANA  LAW.  865 

§  44.  Schedules  of  joint  rates  to  be  public. — Where 
a  schedule  of  joint  rates  or  charges  is  or  may  be  in 
force  between  two  or  more  public  utilities,  such  sched- 
ules shall  in  like  manner  be  printed  and  filed  with  the 
commission  and  so  much  thereof  as  the  commission 
shall  deem  necessary  for  the  use  of  the  public,  shall  be 
filed  in  every  such  station  or  ofBce  as  provided  in  sec- 
tions 41  and  43. 

§  45.  Changes  of  rates  on  notice  and  approval  of 
commission. — No  change  shall  thereafter  be  made  in 
any  schedule,  including  schedules  of  joint  rates,  except 
upon  thirty  days'  notice  to  the  commission  and  ap- 
proval by  the  commission  and  all  such  changes  shall 
be  plainly  indicated  upon  existing  schedules  or  by  filing 
new  schedules  in  Heu  thereof  thirty  days  prior  to  the 
time  the  same  are  to  take  effect:  Provided,  That  the 
commission,  upon  application  of  any  public  utility,  may 
prescribe  a  less  time  within  which  a  reduction  may  be 
made. 

§  46.  Revised  schedules  to  be  pubhc. — Copies  of 
all  new  schedules  shall  be  filed  as  hereinbefore  pro- 
vided in  every  station  or  ofhce  of  such  public  utility 
where  payments  are  made  by  consumers  or  users  ten 
days  prior  to  the  time  the  same  are  to  take  effect,  un- 
less the  commission  shall  prescribe  a  less  time. 

§  47.  Discrimination  in  rates  unlawful. — It  shall  be 
unlawful  for  any  public  utility  to  charge,  demand,  col- 
lect or  receive  a  greater  or  less  compensation  for  any 
service  performed  by  it  within  the  State  or  for  any 
service  in  connection  therewith  than  is  specified  in  such 
printed  schedules,  including  schedules  of  joint  rates,  as 
may  at  the  time  be  in  force,  or  to  demand,  collect  or 
receive  any  rates,  tolls  or  charges  not  specified  in  such 

55— Pub.  Ut 


866  PUBLIC   UTILITIES. 

schedule.  The  rates,  tolls  and  charges  named  therein 
shall  be  the  lawful  rates,  tolls  and  charges  unless  the 
same  are  changed  as  provided  in  this  act. 

§  48.     Forms  of  schedules  subject  to  change. — ^The 

commission  may  prescribe  such  changes  in  the  form 
in  which  the  schedules  are  issued  by  any  public  utility 
as  may  be  found  to  be  expedient. 

§  49.  Classification  of  service.  —  The  commission 
shall  provide  for  a  comprehensive  classification  of  such 
service  for  each  public  utility  and  such  classification 
may  take  into  account  the  quantity  used,  the  time  when 
used,  the  purpose  for  which  used  and  other  reasonable 
consideration.  Each  public  utility  is  required  to  con- 
form its  schedules  of  rates,  tolls  and  charges  to  such 
classification. 

§  50.    Reasonable  rules — Publicity  of  proceedings. — 

The  commission  shall  have  power  to  adopt  reasonable 
and  proper  rules  and  regulations  relative  to  all  inspec- 
tions, tests,  audits  and  investigations  and  to  adopt  and 
publish  reasonable  and  proper  rules  to  govern  its  pro- 
ceedings, and  to  regulate  the  mode  and  manner  of  all 
investigations  of  public  utilities  and  other  parties  be- 
fore it.     All  hearings  shall  be  open  to  the  public. 

§  51.  Inquiries  into  business  methods. — The  com- 
mission shall  have  authority  to  inquire  into  the  man- 
agement of  the  business  of  all  public  utilities,  and  shall 
keep  itself  informed  as  to  the  manner  and  method  in 
which  the  same  is  conducted  and  shall  have  the  right 
to  obtain  from  any  public  utility  all  necessary  informa- 
tion to  enable  the  commission  to  perform  its  duties. 

§  52.  Books  and  records  subject  to  inspection — Ex- 
amination of  officials. — The   commission   or   any   com- 


INDIANA   LAW.  867 

missioner  when  authorized  by  the  commission  or  any 
person  or  persons  employed  by  the  commission  for  that 
purpose,  shall  upon  demand  have  the  right  to  inspect 
the  books,  accounts,  papers,  records  and  memoranda 
of  any  public  utility  and  to  examine,  under  oath,  any 
officer,  agent  or  employe  of  such  public  utility  in  rela- 
tion to  its  business  and  affairs.  Any  person  other  than 
one  of  said  commissioners  who  shall  make  such  de- 
mand shall  produce  his  authority  to  make  such  inspec- 
tion. 

§  53.     Production  of  papers  and  records  by  judicial 

process. — The  commission  may  require  by  order  or 
subpoena  to  be  served  on  any  public  utility  in  the  same 
manner  that  a  summons  is  served  in  a  civil  action  in 
the  circuit  court,  the  production  within  the  State  at 
such  time  and  place  as  it  may  designate,  of  any  books, 
accounts,  papers  or  records  kept  by  said  public  utility 
in  any  office  or  place  without  the  State  of  Indiana,  or 
verified  copies  in  lieu  thereof,  if  the  commission  shall 
so  order,  in  order  that  an  examination  thereof  may  be 
made  by  the  commission  or  under  its  direction.  Any 
public  utility  failing  or  refusing,  after  reasonable  writ- 
ten notice,  to  comply  with  any  such  order  or  subpoena 
shall,  for  each  day  it  shall  so  fail  or  refuse,  forfeit  and 
pay  into  the  state  treasury  a  sum  of  not  less  than  fifty 
dollars  nor  more  than  five  hundred  dollars. 

§  54.  Powers  of  agents  to  investigate.  —  For  the 
purpose  of  making  any  investigation  with  regard  to 
any  public  utility  the  commission  shall  have  power  to 
appoint  by  an  order  in  writing  an  agent,  whose  duties 
shall  be  prescribed  in  such  order.  In  the  discharge  of 
his  duties  such  agent  shall  have  every  power  whatso- 
ever of  an  inquisitorial  nature  granted  in  this  act  to  the 
commission.     The  commission  mav  conduct  any  num- 


868  PUBLIC  UTILITIES. 

ber  of  such  investigations  contemporaneously  through 
different  agents;  and  may  delegate  to  such  agent  the 
taking  of  all  testimony  bearing  upon  any  investigation 
or  hearing.  The  decision  of  the  commission  shall  be 
based  upon  its  examination  of  all  testimony  and  rec- 
ords. The  recommendations  made  by  such  agents  shall 
be  advisory  only,  and  shall  not  preclude  the  taking  of 
further  testimony  if  the  commission  so  order,  nor  fur- 
ther investigation, 

§  55.  Duty  to  furnish  information. — Every  public 
utility  shall  furnish  to  the  commission  all  information 
required  by  it  to  carry  into  effect  the  provisions  of  this 
act,  and  shall  make  specific  answers  to  all  questions 
submitted  by  the  commission. 

§  56.  Information  under  oath. — Any  public  utility 
receiving  from  the  commission  any  blanks  writh  direc- 
tions to  fill  the  same  shall  cause  the  same  to  be  prop- 
erly filled  out  so  as  to  answer  fully  and  correctly  each 
question,  therein  propounded,  and  in  case  it  is  unable 
to  answer  any  question,  it  shall  give  a  good  and  suffi- 
cient reason  for  such  failure,  and  said  answers  shall  be 
verified  under  oath,  by  the  president,  secretary,  super- 
intendent or  general  manager  or  person  in  charge  of 
such  public  utility  and  returned  to  the  commission  at 
its  office  within  the  period  fixed  by  the  commission. 
Whenever  required  by  the  commission,  every  public 
utility  shall  deliver  to  the  commission  for  examination 
any  or  all  maps,  profiles,  contracts,  reports  of  engineer 
and  all  documents,  books,  accounts,  papers  and  records 
or  copies  of  any  or  all  of  the  same  with  a  complete  in- 
ventory of  all  its  property  in  such  form  as  the  com- 
mission may  direct. 

§  57.  Complaints  by  customers  to  be  investigated. 
— Upon  a  complaint  made  against  any  public  utility  by 


INDIANA   LAW.  869 

any  mercantile,  agricultural  or  manufacturing  society 
or  by  any  body  politic  or  municipal  organization  or  by 
ten  persons,  firms,  corporations  or  associations,  or 
ten  complainants  of  all  or  any  of  the  aforementioned 
classes,  or  by  any  public  utility,  that  any  of  the  rates, 
tolls,  charges  or  schedules  or  any  joint  rate  or  rates  in 
which  such  petitioner  is  directly  interested  are  in  any 
respect  unreasonable  or  unjustly  discriminatory,  or  that 
any  regulation,  measurement,  practice  or  act  whatso- 
ever affecting  or  relating  to  the  service  of  any  public 
utility  or  any  service  in  connection  therewith  is  in  any 
respect  unreasonable,  unsafe,  insufficient  or  unjustly 
■discriminatory  or  that  any  service  is  inadequate  or  can 
not  be  obtained,  the  commission  shall  proceed,  with  or 
without  notice,  to  make  such  investigation  as  it  may 
deem  necessary  or  convenient.  But  no  order  affecting 
said  rates,  tolls,  charges,  schedules,  regulations,  meas- 
urements, practice  or  act  complained  of,  shall  be  en- 
tered by  the  commission  without  a  formal  public  hear- 
ing. 

§  58.  Hearing  on  complaint  and  notice. — The  com- 
mission shall,  prior  to  such  formal  hearing,  notify  the 
public  utility  complained  of  that  a  complaint  has  been 
made,  and  ten  days  after  such  notice  has  been  given 
the  commission  may  proceed  to  set  a  time  and  place 
for  a  hearing  and  an  investigation  as  hereinafter  pro- 
vided. 

§  59.  Notice  and  opportunity  to  be  heard.  —  The 
commission  shall  give  the  public  utility  and  the  com- 
plainant, if  any,  ten  days'  notice  of  the  time  and  place 
when  and  where  such  hearing  and  investigation  will 
be  held  and  such  matters  considered  and  determined. 
Both  the  public  utility  and  complainant  shall  be  en- 
titled to  be  heard  and  shall  have  process  to  enforce 
the  attendance  of  witnesses. 


870  PUBLIC   UTILITIES. 

§  60.  Separate  hearings — Damage  to  complainant 
unnecessary. — The  commission  may,  in  its  discretion, 
when  complaint  is  made  of  more  than  one  rate  or 
charge,  order  separate  hearings  thereon,  and  may  con- 
sider and  determine  the  several  matters  complained  of 
separately  and  at  such  times  as  it  may  prescribe.  No 
complaint  shall  at  any  time  be  dismissed  because  of 
the  absence  of  direct  damage  to  the  complainant. 

§61.     Investigation  of  commission  on  own  motion. 

— Whenever  the  commission  shall  believe  that  any  rate 
or  charge  may  be  unreasonable  or  unjustly  discrimina- 
tory or  that  any  service  is  inadequate,  or  can  not  be 
obtained  or  that  an  investigation  of  any  matters  relat- 
ing to  any  public  utility  should  for  any  reasons  be 
made,  it  may  on  its  motion  summarily  investigate  the 
same  with  or  without  notice. 

§  62.  Hearing  on  motion  of  commissioner. — If,  after 
making  iuch  investigation,  the  commission  becomes  sat- 
isfied that  sufficient  grounds  exist  to  warrant  a  formal 
hearing  being  ordered  as  to  the  matters  so  investigated, 
it  shall  furnish  such  public  utility  interested  a  state- 
ment notifying  the  public  utility  of  the  matters  under 
investigation.  Ten  days  after  such  notice  has  been 
given  the  commission  may  proceed  to  set  a  time  and 
place  for  a  hearing  and  an  investigation  as  hereinbe- 
fore provided. 

§  63.  Notice  and  hearing  as  on  complaint. — Notice 
of  the  time  and  place  for  such  hearing  shall  be  given 
to  the  public  utility  and  to  such  other  interested  per- 
sons as  the  commission  shall  deem  necessary  as  pro- 
vided in  section  59,  and  thereafter  proceedings  shall 
be  had  and  conducted  in  reference  to  the  matter  inves- 
tigated in  like  manner  as  though  complaint  had  been 


INDIANA   LAW.  87I 

filed  with  the  commission  relative  to  the  matter  inves- 
tigated, and  the  same  order  or  orders  may  be  made  in 
reference  thereto  as  if  such  investigations  had  been 
made  on  complaint. 

§  64.  Complaint  of  public  utility. — Any  public  util- 
ity may  make  complaint  as  to  any  matter  affecting  its 
own  rates  or  service  with  like  effect  as  though  made 
by  any  mercantile,  agricultural  or  manufacturing  so- 
ciety, body  politic  or  municipal  organization  or  by  ten 
persons,  firms,  corporations  or  associations. 

§  65.  Power  to  examine  under  oath  and  compel  at- 
tendance of  witnesses. — Each  of  the  commissioners  and 
every  agent  provided  for  in  this  act  shall  have  power 
to  administer  oaths,  certify  to  official  acts,  issue  sub- 
poenas, compel  the  attendance  of  witnesses  and  the 
production  of  books,  accounts,  papers,  records,  docu- 
ments and  testimony.  In  case  of  disobedience  on  the 
part  of  any  person  or  persons  to  comply  with  any  or- 
der of  the  commission  or  any  commissioner  or  any  sub- 
poena, or  on  the  refusal  of  any  witness  to  testify  to 
any  matter  regarding  which  he  may  be  lawfully  inter- 
rogated before  the  commission  or  its  authorized  agent, 
it  shall  be  the  duty  of  the  circuit  or  superior  court  of 
any  county  or  the  judge  therof,  on  application  of  a 
commissioner,  to  compel  the  obedience  to  the  require- 
ments of  a  subpoena  issued  from  such  court  or  a  refusal 
to  testify  therein. 

§  66.  Witness  fees  and  mileage. — Each  witness  who 
shall  appear  before  the  commission  or  its  agent  by  its 
order  shall  receive  for  his  attendance  the  fees  and 
mileage  now  provided  for  witnesses  in  civil  cases  in 
courts  of  record  which  shall  be  audited  and  paid  by 
the  State,  in  the  same  manner  as  other  expenses  are 


872  PUBLIC   UTILITIES. 

audited  and  paid,  upon  the  presentation  of  proper 
vouchers  sworn  to  by  such  witnesses  and  approved  by 
the  chairman  of  the  commission.  No  witness  sub- 
poenaed at  the  instance  of  parties  other  than  the  com- 
mission shall  be  entitled  to  compensation  from  the 
State  for  attendance  or  travel  unless  the  commission 
shall  certify  that  his  testimony  was  material  to  the 
matter  investigated. 

§  67.  Depositions  of  nonresidents. — The  commis- 
sion or  any  party  may,  in  any  investigation,  cause  the 
depositions  of  witnesses  residing  without  the  State  to 
be  taken  in  the  manner  prescribed  by  law  for  like  depo- 
sitions in  civil  actions  in  circuit  courts. 

§  68.     Records  of  stenographer  of  all  proceedings. 

— A  record  shall  be  kept  of  all  proceedings  had  before 
the  commission  or  its  agent  or  any  formal  investigation 
had  and  all  testimony  shall  be  taken  down  by  the  ste- 
nographer appointed  by  the  commission. 

§  69.  Transcript  of  proceedings  and  testimony. — 
Whenever  any  action  is  commenced  against  the  com- 
mission under  the  provisions  of  sections  78  to  86  of 
this  act,  the  commission  shall,  before  said  action  is 
reached  for  trial,  cause  a  certified  transcript  of  all  pro- 
ceedings had  and  testimony  taken  upon  such  investiga- 
tion to  be  filed  with  the  clerk  of  the  circuit  or  superior 
court  of  the  county  where  the  action  is  pending. 

§  70.     Verified  transcript  admissible  in  evidence. — 

A  transcript  copy  of  the  evidence  and  proceedings,  or 
any  specific  part  thereof,  on  any  investigation  taken  by 
the  stenographer  appointed  by  the  commission,  being 
certified  under  oath  by  such  stenographer  to  be  a  true 
and  correct  transcript  of  all  the  testimony  on  the  inves- 


I 


INDIANA   LAW.  873 

tigation  of  a  particular  witness,  or  of  other  specific  part 
thereof,  carefully  prepared  by  him  from  his  original 
notes,  and  to  be  a  correct  statement  of  the  evidence 
and  proceedings  had  on  such  investigations  so  purport- 
ing to  be  taken  and  transcribed,  shall  be  received  in 
evidence  with  the  same  effect  as  if  such  reporter  were 
present  and  testified  to  the  fact  so  certified. 

§  71.  Copy  of  transcript  to  parties  to  investigation. 
— A  copy  of  such  transcript  shall  be  furnished  on  terms 
fixed  by  the  commission  to  any  party  to  such  investiga- 
tion. 

§  y2.  Commission  to  fix  and  determine  rates. — 
Whenever,  upon  an  investigation,  the  commission  shall 
find  any  rates,  tolls,  charges,  schedules  or  joint  rate  or 
rates  to  be  unjust,  unreasonable,  insufficient  or  unjustly 
discriminatory  or  to  be  preferential,  or  otherwise  in 
violation  of  any  of  the  provisions  of  this  act,  the  com- 
mission shall  determine  and  by  order  fix  just  and  rea- 
sonable rates,  tolls,  charges,  schedules  or  joint  rates  to 
be  imposed,  observed  and  followed  in  the  future  in  lieu 
of  those  found  to  be  unjust,  unreasonable,  insufficient 
or  unjustly  discriminatory  or  preferential  or  otherwise 
in  violation  of  any  of  the  provisions  of  this  act. 

§  73.  Reasonable  regulations  and  requirements. — 
Whenever,  upon  investigation  made  under  the  provi- 
sions of  this  act,  the  commission  shall  find  any  regula- 
tions, measurements,  practices,  acts  or  service  to  be 
unjust,  unreasonable,  unwholesome,  unsanitary,  unsafe, 
insufficient,  preferential,  unjustly  discriminatory  or 
otherwise  in  violation  of  any  of  the  provisions  of  this 
act ;  or  shall  find  that  any  service  is  inadequate  or  that 
any  service  which  can  be  reasonably  demanded  can 
not  be  obtained,   the  commission  shall  determine  and 


874  PUBLIC   UTILITIES 

declare  and  by  order  fix  just  and  reasonable  measure- 
ments, regulations,  acts,  practices  or  service  to  be  fur- 
nished, imposed,  observed  and  follow^ed  in  the  future  in 
lieu  of  those  found  to  be  unjust,  unreasonable,  unwhole- 
some, unsanitary,  unsafe,  insufficient,  preferential,  un- 
justly discriminatory,  inadequate  or  otherwise  in  viola- 
tion of  this  act,  as  the  case  may  be,  and  shall  make 
such  other  order  respecting  such  measurement,  regu- 
lation, act,  practice  or  service  as  shall  be  just  and  rea- 
sonable. 

§  74.  Costs  of  investigation — Orders  effective. — 
Whenever  upon  an  investigation  made  under  the  pro- 
visions of  this  act  the  commission  shall  find  that  any 
rate,  toll,  charge,  schedule  or  joint  rate  or  rates  is  un- 
just, unreasonable,  insufficient  or  unjustly  discrimina- 
tory or  preferential  or  otherwise  in  violation  of  any  of 
the  provisions  of  this  act,  or  that  any  measurement, 
regulation,  practice,  act  or  service  complained  of  is  un- 
just, unreasonable,  unwholesome,  unsanitary,  unsafe, 
insufficient,  preferential,  unjustly  discriminatory  or 
otherwise  in  violation  of  any  of  the  provisions  of  this 
act,  or  it  shall  find  that  any  service  is  inadequate  or 
that  any  service  which  can  reasonably  be  demanded 
can  not  be  obtained,  the  commission  shall  ascertain 
and  declare  and  by  order  fix  the  expenses  incurred  by 
the  commission  upon  such  investigation  and  shall,  by 
such  order,  direct  such  public  utility  to  pay  to  the  state 
treasurer,  within  twenty  days  thereafter,  such  expenses 
so  incurred.  The  commission  shall  cause  a  certified 
copy  of  all  such  orders  to  be  delivered  to  an  officer  or 
agent  of  the  public  utility  affected  thereby,  and  all  such 
orders  shall,  of  their  own  force,  take  effect  and  become 
operative  twenty  (20)  days  after  service  thereof  unless 
a  different  time  be  provided  in  said  order. 


INDIANA   LAW.  875 

§  75.  Orders  binding  on  all  and  subject  to  change 
only  on  approval. — All  public  utilities  to  which  the  or- 
der applies  shall  make  such  changes  in  their  schedule 
on  file  as  may  be  necessary  to  make  the  same  conform 
to  said  order,  and  no  change  shall  thereafter  be  made 
by  any  public  utility  in  any  such  rates,  tolls  or  charges, 
or  any  joint  rate  or  rates,  without  the  approval  of  the 
commission.  Certified  copies  of  all  other  orders  of  the 
commission  shall  be  delivered  to  the  public  utility  af- 
fected thereby  in  like  manner  and  the  same  shall  take 
effect  within  such  time  thereafter  as  the  commission 
shall  prescribe. 

§  76.  Orders  subject  to  change  by  commission  on 
notice  and  hearing. — The  commission  may  at  any  time, 
upon  notice  to  the  public  utility  and  after  opportunity 
to  be  heard  as  provided  in  sections  57  to  71,  rescind, 
alter  or  amend  any  order  fixing  any  rate  or  rates,  tolls, 
charges  or  schedules,  or  any  other  order  made  by  the 
commission,  and  certified  copies  of  the  same  shall  be 
served  and  take  effect  as  herein  provided  for  original 
orders. 

§  yy.  Rates  and  regulations  presumed  reasonable 
until  decided  otherwise.  —  All  rates,  tolls,  charges. 
schedules  and  joint  rates  fixed  by  the  commission  shall 
be  in  force  and  be  prima  facie  lawful,  and  all  regu- 
lations, practices  and  services  prescribed  by  the  com- 
mission shall  be  in  force  and  shall  be  prima  facie  rea- 
sonable unless  finally  found  otherwise  in  an  action 
brought  for  that  purpose  pursuant  to  the  provisions  of 
sections  78  to  85. 

§  78.  Action  to  set  aside  to  be  advanced  for  trial. 
— Any  public  utility  and  any  person  or  corporation  in 

interest  being  dissatisfied  with  any  order  of  the  com- 


876  PUBLIC   UTILITIES. 

mission  fixing  any  rate  or  rates,  tolls,  charges,  sched- 
ules, joint  rate  or  rates,  or  any  order  fixing  any  regu- 
lations, practices,  act  or  service  may  commence  an  ac- 
tion in  the  circuit  or  superior  court  of  any  county  in 
which  such  order  of  the  commission  is  operative 
against  the  commission  as  defendant  to  vacate  or  set 
aside,  any  such  order  or  enjoin  the  enforcement  thereof 
on  the  ground  that  the  rate  or  rates,  tolls,  charges, 
schedules,  joint  rate  or  rates  fixed  in  such  order  is  in- 
sufficient, unreasonable  or  unlaw^ful,  or  that  any  such 
regulation,  practice,  act  or  service  fixed  in  such  order 
is  insufficient,  unreasonable  or  unlaw^ful,  in  which  ac- 
tion a  copy  of  the  complaint  shall  be  served  with  the 
summons.  The  answer  of  the  commission  to  the  com- 
plaint shall  be  filed  within  ten  (10)  days  after  service 
of  summons.  All  such  actions  shall  have  precedence 
over  any  civil  case  of  a  different  nature  pending  in 
any  such  court,  and  the  circuit  court  or  superior  court 
shall  always  be  deemed  open  for  the  trial  thereof,  and 
the  same  shall  be  tried  and  determined  as  other  civil 
actions. 

§  79.  Appeals  from  commission  to  be  filed  within 
sixty  days. — Every  proceeding,  action  or  suit  to  set 
aside  or  vacate  any  determination  or  order  of  the  com- 
mission or  to  enjoin  the  enforcement  thereof,  or  to  pre- 
vent in  any  way  such  order  or  determination  from  be- 
coming effective,  shall  be  commenced  and  every  right 
of  recourse  to  the  courts  shall  be  exercised  within 
sixty  (60)  days  after  the  entry  or  rendition  of  such  or- 
der or  determination,  and  the  right  to  commence  any 
such  action,  proceeding  or  suit  or  to  exercise  any  right 
of  recourse  to  the  courts,  shall  terminate  absolutely  at 
the  end  of  such  sixty  (60)  days  after  such  entry  or 
rendition  thereof:  Provided,  That  if  a  rehearing  has 
been  petitioned  for  and  granted  the  right  of  recourse 


INDIANA  LAW.  877 

to  the  courts  shall  terminate  thirty  (30)  days  after 
the  final  determination  by  the  commission  after  such 
rehearing. 

§  80.  Injunction  only  on  notice  and  hearing. — No 
injunction  shall  issue  suspending  or  staying  any  order 
of  the  commission,  except  upon  application  to  the  cir- 
cuit or  superior  court  of  any  county  in  which  such  or- 
der is  operative,  or  judge  thereof,  notice  to  the  com- 
mission and  hearing. 

§81.  New  evidence  to  commission — Stay  of  pro- 
ceedings.— If,  upon  the  trial  of  such  action,  evidence 
shall  be  introduced  by  the  plaintiff  which  is  found  by 
the  court  to  be  difTerent  from  that  offered  upon  the 
hearing  before  the  commission,  or  its  authorized  agent, 
or  additional  thereto,  the  court,  before  proceeding  to 
render  judgment,  unless  the  parties  to  such  action  stip- 
ulate in  writing  to  the  contrary,  shall  transmit  a  copy 
of  such  evidence  to  the  commission  and  shall  stay  fur- 
ther proceedings  in  said  action  for  fifteen  (15)  days 
from  the  date  of  such  transmission.  Upon  the  receipt 
of  such  evidence,  the  commission  shall  consider  the 
same  and  may  alter,  modify,  amend  or  rescind  its  order 
relating  to  such  rate  or  rates,  tolls,  charges,  schedules, 
joint  rate  or  rates,  regulations,  practice,  act  or  services 
complained  of  in  said  action,  and  shall  report  its  action 
thereon  to  said  court  within  ten  (10)  days  from  the 
receipt  of  such  evidence. 

§  82.  Supplemental  findings  of  commission  and  ac- 
tion of  court. — If  the  commission  shall  rescind  its  order 
complained  of,  the  action  shall  be  dismissed;  if  it  shall 
alter,  modify  or  amend  the  same,  such  altered,  modified 
or  amended  order  shall  take  the  place  of  the  original 
order  complained  of,   and  judgment   shall  be   rendered 


8yS  PUBLIC   UTILITIES. 

thereon  as  though  made  by  the  commission  in  the  first 
instance.  If  the  original  order  shall  not  be  rescinded 
or  changed  by  the  commission,  judgment  shall  be  ren- 
dered upon  such  original  order. 

§  83.  Appeal  to  Supreme  Court  within  sixty  days 
to  be  advanced  for  trial. — Either  party  to  said  action, 
within  sixty  (60)  days  after  service  of  a  copy  of  the 
order  or  judgment  of  the  circuit  or  superior  court,  or 
within  such  further  time  as  the  Supreme  Court  may 
grant,  may  appeal  to  the  Supreme  Court.  Where  an 
appeal  is  taken  the  cause  shall,  on  the  return  of  the 
papers  to  the  Supreme  Court,  be  immediately  placed 
on  the  advance  docket  of  the  then  pending  term,  and 
shall  be  assigned  and  brought  to  a  hearing  in  the  same 
manner  as  other  causes  on  the  advance  docket.  The 
Supreme  Court  shall  have  the  right  to  transfer  any  of 
such  appeals  to  the  appellate  court  of  Indiana  for  deci- 
sion, and  said  court  is  given  power  and  jurisdiction  to 
determine  any  of  such  appeals  so  transferred. 

§  84.  Burden  of  proof. — In  all  trials,  actions  and 
proceedings  arising  under  the  provisions  of  this  act  or 
growing  out  of  the  exercise  of  the  authority  and  pow- 
ers granted  herein  to  the  commission,  the  burden  of 
proof  shall  be  upon  the  party  adverse  to  such  commis- 
sion or  seeking  to  set  aside  any  determination,  require- 
ment, direction  or  order  of  said  commission,  to  show 
that  the  determination,  requirement,  direction  or  order 
of  the  commission  complained  of  is  unreasonable  or  un- 
lawful as  the  case  may  be. 

§  85.  Court  proceedings  to  be  followed. — In  all  ac- 
tions and  proceedings  in  court  arising  under  this  act  all 
processes  shall  be  served  and  the  practice  and  rules  of 
evidence  shall  be  the  same  as  in  civil  action,  except  as 


INDIANA  LAW.  879 

Otherwise  herein  provided.  Every  sheriff  or  other  of- 
ficer empowered  to  execute  civil  processes  shall  exe- 
cute any  process  issued  under  the  provisions  of  this  act 
and  shall  receive  such  compensation  therefor  as  may 
be  prescribed  by  law  for  similar  services. 

§  86.  Incriminating  evidence — Witnesses. — No  per- 
son shall  be  excused  from  testifying  or  from  producing 
books,  accounts  and  papers  in  any  proceeding  based 
upon  or  growing  out  of  any  violation  of  the  provisions 
of  this  act  on  the  ground  or  for  the  reason  that  the 
testimony  or  evidence,  documentary  or  otherwise,  re- 
quired of  him  would  incriminate  him  or  subject  him  to 
penalty  or  forfeiture;  but  no  person  having  so  testified 
shall  be  prosecuted  or  subjected  to  any  penalty  or  for- 
feiture for  or  on  account  of  any  transaction,  matter  or 
thing  concerning  which  he  may  have  testified  or  pro- 
duced any  documentary  evidence :  Provided,  That  no 
person  testifying  shall  be  exempted  from  prosecution 
or  punishment  for  perjury  in  so  testifying. 

§  87.  Certified  copies  of  orders. — Upon  application 
of  any  person  the  commission  shall  furnish  certified 
copies,  under  the  seal  of  the  commission,  of  any  order 
made  by  it,  which  shall  be  prima  facie  evidence  of  the 
facts  stated  therein. 

§  88.  Issue  of  stocks,  bonds,  etc.,  limited  to  neces- 
sity.— No  public  utility  shall  hereafter  issue  for  any 
purposes  connected  with  or  relating  to  any  part  of  its 
business,  any  stocks,  certificates  of  stock,  bonds,  notes 
or  other  evidences  of  indebtedness,  payable  at  periods 
of  more  than  twelve  months,  to  an  amount  exceeding 
that  which  may  from  time  to  time  be  reasonably  nec- 
essary, determined  as  herein  provided,  for  the  purpose 
for    which    such    issue    of    stock,    certificates    of    stock, 


880  PUBLIC   UTILITIES. 

bonds,  notes  or  other  evidences  of  indebtedness   may- 
be authorized. 

§  89.  Capitalization  —  Adequate  consideration  for 
stocks  and  bonds. — No  pubhc  utility  shall  issue  any 
stock  or  certificate  of  stock,  except  in  consideration  of 
money  or  of  labor  or  property  at  its  true  money  value 
as  found  and  determined  by  the  commission  actually 
received  by  it.  No  stock  or  certificate  of  stock  shall 
be  sold  at  a  discount  or  premium  without  the  approval 
of  the  commission,  and  if  sold  at  a  discount,  the  com- 
mission shall  make  a  record  thereof  and  give  such 
publicity  of  the  fact  as  it  may  deem  necessary,  at  the 
expense  of  the  utility.  No  public  utility  shall  issue 
any  bonds,  notes  or  other  evidences  of  indebtedness, 
except  for  money  or  labor  or  property  estimated  at 
its  true  money-value  as  found  and  determined  by  the 
commission  actually  received  by  it  equal  to  a  sum  to 
be  approved  by  the  commission  not  less  than  seventy- 
five  per  cent.  (75%)  of  the  face  value  thereof:  Pro- 
vided, That  any  bonds,  notes  or  other  evidences  of  in- 
debtedness authorized  prior  to  February  i,  1913,  but 
not  issued,  and  bearing  interest  not  to  exceed  four  per 
centum  per  annum,  may,  with  the  approval  of  the  com- 
mission, be  issued  for  a  price  not  less  than  sixty-five 
per  centum  of  the  par  value  thereof :  Provided  further, 
however,  That  no  bonds,  notes  or  other  evidences  of 
indebtedness  of  any  such  public  utility  issued  for  the 
purpose  of  refunding,  retiring  or  discharging  any  of  its 
bonds,  notes  or  other  evidences  of  indebtedness  shall  be 
issued  without  the  consent  of  the  commission  to  pay, 
refund,  retire  or  discharge  any  discount  paid  or  incurred 
after  February  i,  1913,  by  such  public  utility  upon  or  in 
connection  with  the  issuance  of  bonds,  notes  or  other 
evidences  of  indebtedness  to  be  refunded,  retired  or  dis- 
charged.    The  amount  of  bonds,  notes  and  other  evi- 


INDIANA   LAW.  88l 

dences  of  indebtedness  which  any  pubhc  utility  may 
issue  shall  bear  a  reasonable  proportion  to  the  amount 
of  stock  and  certificates  of  stock  issued  by  such  utility, 
due  consideration  being  given  to  the  nature  of  the  busi- 
ness in  which  the  corporation  is  engaged,  its  credit, 
future  prospects  and  earnings,  the  effect  which  such 
issue  will  have  upon  the  management  and  efficient  op- 
eration of  the  public  utility  by  reason  of  the  relative 
amount  of  financial  interest  which  the  stockholders  will 
have  in  the  corporation  and  the  circumstances  sur- 
rounding the  operation  and  business  of  the  corporation. 

§  90.  Purposes  for  which  stock,  bonds,  etc.,  may 
be  issued. — A  public  utility  as  defined  in  section  one 
(i)  of  this  act  may,  with  the  approval  of  the  commis- 
sion, issue  stock,  certificates  of  stock,  bonds,  notes  or 
other  evidences  of  indebtedness,  payable  at  periods  of 
more  than  twelve  (12)  months  after  the  date  thereof, 
when  necessary  for  the  acquisition  of  property,  the  con- 
struction, completion,  extension  or  improvement  of  its 
facilities,  plant  or  distributing  system,  or  for  the  im- 
provement of  its  service,  or  for  the  discharge  or  lawful 
refunding  of  its  obligations,  or  for  the  reimbursement 
of  moneys  actually  expended  from  income,  or  from  any 
other  moneys  in  the  treasury  of  the  public  utility  for 
such  purposes,  not  secured  or  obtained  from  the  issue 
of  stocks,  bonds,  notes  or  other  evidences  of  indebted- 
ness of  such  public  utility  within  five  (5)  years  next 
prior  to  the  filing  of  an  application  with  the  commis- 
sion for  the  required  authorization  for  any  of  the  afore- 
said purposes  in  cases  where  the  applicant  shall  have 
kept  its  accounts  and  vouchers  of  such  expenditure  in 
such  manner  as  to  enable  the  commission  to  ascertain 
the  amount  of  moneys  so  expended  and  the  purposes 
for  which  such  expenditure  was  made. 

56— Pub.  Ut 


S82 


PUBLIC   UTILITIES. 


§  91,     Proceedings    and    statement   before   issue. — 

Whenever  a  public  utility  desires  to  issue  stocks,  cer- 
tificates of  stock,  bonds,  notes  or  other  evidences  of 
indebtedness,  payable  in  more  than  one  (i)  year  from 
date,  with  respect  to  the  public  utility  owned  or  op- 
erated by  it,  it  shall  file  with  the  commission  a  state- 
ment verified  by  its  president  and  secretary,  or  two 
(2)  of  its  incorporators  or  owners  if  it  have  no  such 
officers,  setting  forth  (a)  the  amount  and  character  of 
the  securities  proposed  to  be  issued,  (b)  the  purposes 
for  which  they  are  to  be  issued,  (c)  the  description  and 
estimated  value  of  any  property  to  be  acquired  through 
the  said  issue,  (d)  the  amount  of  cash  to  be  received 
for  said  securities,  (e)  the  financial  condition  of  the 
public  utility  and  its  previous  operations  so  far  as  rele- 
vant. For  the  purposes  of  enabling  it  to  determine 
whether  the  proposed  issue  complies  with  the  provi- 
sions of  this  act,  the  commission  shall  make  such  in- 
quiry or  investigation,  hold  such  hearing,  and  examine 
such  witnesses,  books,  papers,  documents  or  contracts, 
as  it  may  deem  of  importance  in  enabling  it  to  reach 
a  determination. 


§  92.  Commission's  certificate  —  Capitalization  — 
Franchises  and  considerations. — If  the  commission  shall 
determine  that  such  proposed  issue  complies  with  the 
provisions  of  this  act,  such  authority  shall  thereupon 
be  granted,  and  it  shall  issue  to  the  public  utility  a  cer- 
tificate of  authority  stating:  (a)  the  amount  of  such 
stocks,  certificates  of  stock,  bonds,  notes  or  other  evi- 
dences of  indebtedness,  reasonably  necessary  for  the 
purposes  for  which  they  are  to  be  issued,  and  the  char- 
acter of  the  same;  (b)  the  purposes  for  which  they  are 
to  be  issued  and  the  property  or  services  to  be  acquired 
thereby  valued  in  detail.  Such  public  utiHty  shall  not 
apply  the  proceeds  of  such  stock,  bonds,  notes  or  other 


INDIANA  LAW.  883 

evidences  of  indebtedness  as  aforesaid,  to  any  purposes 
not  specified  in  such  certificate,  nor  issue  such  stock, 
bonds,  notes  or  other  evidences  of  indebtedness,  in 
greater  amounts  than  specified  in  such  certificate. 
Nothing  herein  contained  shall  prohibit  the  commission 
from  giving  its  consent  to  the  issue  of  bonds,  notes  or 
other  evidences  of  indebtedness  for  the  reimbursement 
of  moneys  heretofore  actually  expended  from  income 
for  any  of  the  purposes  specified  in  section  ninety  (90) 
if  in  the  judgment  of  the  commission  such  consent 
should  be  granted:  Provided,  Application  for  such 
consent  shall  be  made  prior  to  January  i,  1915.  For 
the  purpose  of  enabling  it  to  determine  whether  it 
should  issue  such  an  order,  the  commission  shall  make 
such  inquiry  or  investigation,  hold  such  hearings  and 
examine  such  witnesses,  books,  papers,  documents  or 
contracts  as  it  may  deem  of  importance  in  enabling 
it  to  reach  a  determination.  The  commission  shall 
have  power  to  impose  such  conditions  upon  a  public 
utility  in  issuing  of  securities  as  it  may  deem  reason- 
able. Such  public  utilities  shall  not,  without  the  con- 
sent of  the  commission,  apply  said  issue  or  any  pro- 
ceeds thereof  to  any  purpose  not  specified  in  such  or- 
der. Any  public  utility  may  issue  notes,  for  proper 
purposes  and  not  in  violation  of  any  provisions  of  this 
act  or  of  any  other  act,  not  to  exceed  10  per  cent,  of 
the  capital  stock  of  said  public  utility,  payable  at  peri- 
ods of  not  more  than  twelve  (12)  months  without  such 
consent;  but  no  such  notes  shall,  in  whole  or  in  part, 
■directly  or  indirectly,  be  refunded  by  any  issue  of 
stocks  or  bonds  or  by  any  evidence  of  indebtedness 
running  for  more  than  twelve  (12)  months  without  the 
consent  of  the  commission:  Provided,  however.  That 
the  commission  shall  have  no  power  to  authorize  the 
capitalization  of  any  franchise  to  be  a  corporation  or 
to  authorize  the  capitalization  of  any  franchise  or  the 


884  PUBLIC   UTILITIES. 

right  to  own,  operate  or  enjoy  any  franchise  whatso- 
ever in  excess  of  the  amount  (exclusive  of  any  tax  or 
annual  charge)  actually  paid  to  the  State  or  to  any 
political  subdivision  thereof  as  the  consideration  for  the 
grant  of  such  franchise  or  right.  The  capitahzation  of 
a  corporation  formed  by  the  merger  or  consolidation 
of  two  (2)  or  more  corporations  shall  be  subject  to  the 
approval  of  the  commission,  but  in  no  event  shall  such 
capitalization  exceed  the  sum  of  the  capital  stock  of 
the  corporations  so  consolidated,  at  the  par  value  there- 
of, or  such  sums  and  any  additional  sum  actually  paid 
in  cash;  nor  shall  any  contract  for  consolidation  or 
lease  be  capitalized  in  the  stock  of  any  corporation 
whatever;  nor  shall  any  corporation  hereafter  issue 
any  bonds  against  or  as  a  lien  upon  any  contract  for 
consolidation  or  merger. 

§  93.  State  does  not  guarantee  securities  issued  un- 
der this  law. — No  provision  of  this  act  and  no  deed  or 
act  done  or  performed  under  or  in  connection  there- 
with, shall  be  held  or  construed  to  obligate  the  State 
of  Indiana  to  pay  or  guarantee  in  any  manner  what- 
soever, any  stock  or  stock  certificate  or  bond,  note  or 
other  evidence  of  indebtedness  authorized,  issued  or 
executed  under  the  provisions  of  this  act. 

§  94.  Reorganization  required  on  forced  sale — Val- 
uation by  commission  limits  capitalization. — Any  per- 
son or  association  of  persons  other  than  an  existing 
public  service  corporation,  which  shall  have,  or  may 
have  hereafter  become  the  owner  or  assignee  of  the 
rights,  powers,  privileges  and  franchises  of  any  public 
utility  created  or  organized,  by  or  under  the  law  of 
this  state,  by  purchase  under  a  mortgage  sale,  sale  in 
bankrupt  proceedings,  or  sale  under  any  judgment,  or- 
der, decree  or  proceedings    of  any  court  in  this  state,. 


INDIANA   LAW.  885 

including  the  courts  of  the  United  States  sitting  herein, 
shall,  within  sixty  (60)  days  after  such  purchase  or  as- 
signment, organize  anew  by  filing  articles  of  incorpora- 
tion as  provided  by  law,  and  thereupon  shall  have  the 
rights,  privileges  and  franchises  which  such  utility  had, 
or  was  entitled  to  have  at  the  time  of  such  purchase 
and  sale.  The  new  corporation  may  issue  stock,  cer- 
tificates of  stock,  bonds,  notes  or  other  evidences  of  in- 
debtedness for  the  property  of  the  former  corporation 
thus  acquired,  in  an  amount  not  to  exceed  the  true 
value  of  such  property,  as  found  and  determined  by  the 
commission,  in  accordance  with  the  provisions  hereof. 

§  95.  Sale,  transfer  or  consolidations  only  on  ap- 
proval of  commission. — No  public  utility  as  defined  in 
section  one  (i)  of  this  act  shall  transfer  or  lease  its 
franchise,  works  or  system  or  any  part  of  such  fran- 
chise, works  or  system  to  any  other  person  or  corpora- 
tion or  contract  for  the  operation  of  its  works  or  sys- 
tem, without  the  written  consent  of  the  commission 
after  a  hearing.  The  permission  and  "approval  of  the 
commission  to  the  assignment,  transfer  or  lease  of  a 
franchise  under  this  section  shall  not  be  construed  to 
revive  or  validate  any  lapsed  or  invalid  franchise  or  to 
enlarge  or  add  to  the  powers  and  privileges  contained 
in  the  grant  of  any  franchise  or  to  waive  any  forfeit- 
ure. No  such  corporation  shall  directly  or  indirectly 
acquire  the  stock  or  bonds  of  any  other  corporation 
incorporated  for  or  engaged  in  the  same  or  a  similar 
business,  or  purporting  to  operate  or  operating  under 
a  franchise  from  the  same  or  any  other  municipality 
unless  authorized  so  to  do  by  the  commission.  Save 
where  stock  shall  be  transferred  or  held  for  the  pur- 
pose of  collateral  security,  only  with  the  consent  of  the 
commission  empowered  by  this  act  to  give  such  con- 
sent, shall  a  corporation  foreign  or  domestic  operating 


886  PUBLIC   UTILITIES. 

a  public  utility  purchase  or  acquire,  take  or  hold  more 
than  ten  per  centum  (io%)  of  the  total  capital  stock 
issued  by  a  corporation  doing  the  same  or  a  similar 
business:  Provided,  That  a  corporation  now  lawfully 
holding  a  majority  of  the  capital  stock  of  any  corpora- 
tion operating  a  public  utility  may,  without  the  consent 
of  the  commission,  acquire  and  hold  the  remainder  of 
the  capital  stock  of  such  corporation  or  any  portion 
thereof. 

Nothing  herein  contained  shall  be  construed  to  pre- 
vent the  holding  of  stock  heretofore  lawfully  acquired 
or  to  prevent  upon  the  surrender  or  exchange  of  said 
stock  pursuant  to  a  reorganization  plan,  the  purchase, 
acquisition,  taking  or  holding  of  a  proportionate 
amount  of  stock  of  any  new  corporation  organized  to 
take  over  at  foreclosure  or  other  sale,  the  property  of 
any  corporation  whose  stock  has  been  thus  surrendered 
or  exchanged.  Every  contract,  assignment,  transfer  or 
agreement  for  transfer  of  stock,  by  or  through  any  per- 
son or  corporation  to  any  corporation,  in  violation  of 
any  provision  of  this  section  shall  be  void  and  of  no 
effect  and  no  such  transfer  or  assignment  shall  be  made 
upon  the  books  of  any  such  corporation  or  be  recog- 
nized effective  for  any  purpose. 

§  955^.  Mergers  of  like  concerns  and  contracts  for 
sale  or  lease  on  approval  of  commission. — That  with 
the  consent  and  approval  of  the  commission,  but  not 
otherwise,  any  two  or  more  public  utilities,  furnishing 
a  like  service  or  product  and  doing  business  in  the  same 
municipality  or  locality  within  this  state,  or  any  two  or 
more  public  utilities  whose  lines  intersect  or  parallel 
each  other  within  this  state  may  be  merged  and  may 
enter  into  contracts  with  each  other  that  will  enable 
such  public  utilities  to  operate  their  lines  or  plants  in 
connection  with  each  other;  and  any  public  utility  may 


INDIANA  LAW.  887 

also,  with  the  consent  of  the  holders  of  three-fourths 
of  the  capital  stock  outstanding,  purchase  or  lease  the 
property,  plant  or  business,  or  any  part  thereof,  of  any 
other  such  public  utility  at  a  price  and  on  terms  fixed 
by  the  commission.  Any  such  public  utility  may,  with 
the  consent  of  three-fourths  of  the  holders  of  the  out- 
standing stock,  sell  or  lease  its  property  or  business  or 
any  part  thereof  to  any  other  such  public  utility  at  a 
price  and  on  terms  fixed  by  the  commission  upon  pay- 
ing in  cash  to  nonconsenting  stockholders  the  appraised 
value  of  their  stock  as  fixed  by  the  commission. 

§  96.  Fee  for  certificate  for  issue  of  securities. — 
The  commission  shall  charge  every  public  ntilitv  re- 
ceiving permission  under  this  act  for  the  issue  of  stocks, 
bonds  or  other  securities  an  amount  equal  to  fifteen 
cents  ($0.15)  for  every  hundred  dollars  of  such  securi- 
ties authorized  by  the  commission  and  the  same  shall 
be  paid  into  the  state  treasury-  before  any  such  securi- 
ties shall  be  issued. 

Money  accruing  from  charges  made  by  the  commis- 
sion is  hereby  appropriated  to  the  commission  for  the 
use  of  the  commission  in  defraying  expenses  under  the 
provisions  of  this  act. 

v?  97.  Competition  —  Certificate  of  public  conven- 
ience— Indeterminate  permit. — No  license,  permit  or 
franchise  shall  be  granted  to  any  person,  copartnership 
or  corporation  to  own.  operate,  manage  or  control  any 
plant  or  equipment  of  any  public  utility  in  any  munici- 
pality where  there  is  in  operation  a  public  utility  en- 
gaged in  similar  service  under  a  license,  franchise  or 
permit  without  first  securing  from  the  commission  a 
declaration  after  a  public  hearing  of  all  parties  inter- 
ested, that  public  convenience  and  necessity  require 
such  second  public  utility.    Any  existing  permit,  license 


888  PUBLIC   UTILITIES. 

or  franchise  which  shall  contain  any  term  whatsoever 
interfering  with  the  existence  of  a  second  public  utility 
is  hereby  declared  to  be  against  public  policy  and  is 
hereby  amended  in  such  manner  as  to  permit  a  munici- 
pality to  grant  a  license,  franchise  or  permit  for  the 
operation  of  such  second  public  utility  pursuant  to  the 
provisions  of  this  act. 

§  98.  Plants  of  municipality — Condemnation  of  pur- 
chase.— No  municipality  shall  hereafter  construct  any 
such  plant  or  equipment  where  there  is  in  operation  in 
such  municipality  a  public  utility  engaged  in  similar 
service  under  an  indeterminate  permit  as  provided  in 
this  act  without  first  securing  from  the  commission  a 
declaration  after  a  pubHc  hearing  of  all  parties  inter- 
ested, that  public  convenience  and  necessity  require 
such  municipal  utility.  But  nothing  in  this  section 
shall  be  construed  as  preventing  a  municipality  acquir- 
ing any  existing  plant  by  purchase  or  by  condemnation 
as  hereinafter  provided. 

§  99.  Foreign  concerns  to  be  excluded. — No  li- 
cense, permit  or  franchise  to  own,  operate,  manage  or 
control  any  plant  or  equipment  of  any  public  utility 
shall  be  hereafter  granted  or  transferred  except  to  a 
corporation  duly  organized  under  the  laws  of  the  State 
of  Indiana,  or  to  a  citizen  of  such  state. 

§  100.  Indeterminate  permits — Revocable  by  com- 
mission —  Purchase  by  municipality.  —  Every  license, 
permit  or  franchise  hereafter  granted  to  any  public 
utility  shall  have  the  effect  of  an  indeterminate  permit 
subject  to  the  provisions  of  this  act,  and  subject  to  the 
provision  that  the  license,  franchise  or  permit  may  be 
revoked  by  the  commission  for  cause  or  that  the  mu- 
nicipality in  which   the   major   part   of   its   property   is 


INDIANA  LAW.  889 

situated  may  purchase  the  property  of  such  pubhc 
utility  actually  used  and  useful  for  the  convenience  of 
the  public  at  any  time  as  provided  herein,  paying  there- 
for the  then  value  of  such  property  as  determined  by 
the  commission  and  according  to  the  terms  and  condi- 
tions fixed  by  said  commission,  subject  to  all  the  pro- 
visions as  to  hearings  and  appeals  set  out  in  section  one 
hundred  and  five  (105)  and  section  one  hundred  and 
six  (106)  hereof.  Any  such  municipality  is  authorized 
to  purchase  such  property  and  every  such  public  utility 
is  required  to  sell  such  property  at  the  value  and  ac- 
cording to  the  terms  and  conditions  determined  by  the 
commission  as  herein  provided.  If  this  act  should  be 
repealed  or  annulled,  then  all  such  indeterminate  fran- 
chises, permits  or  grants  shall  cease  and  become  inop- 
erative, and  in  place  thereof  such  utility  shall  be  rein- 
stated in  the  possession  and  enjoyment  of  the  license, 
permit  or  franchise  surrendered  by  such  utility  at  the 
time  of  the  issue  of  the  indeterminate  franchise,  permit 
or  grant;  but  in  no  event  shall  such  reinstated  license, 
permit  or  franchise  be  terminated  within  a  less  period 
than  five  (5)  years  from  the  date  of  the  repeal  or  an- 
nulment of  this  act. 

§101.  Exchange  of  outstanding  franchises  for  in- 
determinate permits. — Any  public  utility  operating  un- 
der an  existing  license,  permit  or  franchise  shall,  upon 
filing  at  any  time  prior  to  the  expiration  of  such  li- 
cense, permit  or  franchise  and  prior  to  July  i,  1915, 
w^ith  the  clerk  of  the  municipality  which  granted  such 
franchise  and  with  the  commission,  a  written  declara- 
tion, legally  executed,  that  it  surrenders  such  license, 
permit  or  franchise,  receive  by  operation  of  law,  in  lieu 
thereof,  an  indeterminate  permit  as  provided  in  this 
act;  and  such  public  utility  shall  hold  such  permit  un- 
der all  the  terms,  conditions  and  limitations  of  this  act. 


890  PUBLIC   UTILITIES. 

§  102.  Acceptance  of  indeterminate  permit  consti- 
tutes consent  to  purchase  by  municipality. — Any  public 
utility  accepting  or  operating  under  any  indeterminate 
license,  permit  or  franchise  hereafter  granted  shall  by 
acceptance  of  any  such  indeterminate  license,  permit  or 
franchise  be  deemed  to  have  consented  to  a  future  pur- 
chase of  its  property  by  the  municipahty  in  which  the 
major  part  of  it  is  situate  at  the  value  and  under  the 
terms  and  conditions  determined  by  the  commission 
as  provided  in  this  act,  and  shall  thereby  be  deemed  to 
have  waived  the  right  of  requiring  the  necessity  of 
such  taking  to  be  established  by  the  verdict  of  a  jury, 
and  to  have  waived  all  other  remedies  and  rights  rela- 
tive to  condemnation,  except  such  rights  and  remedies 
as  are  provided  in  this  act  and  shall  have  been  deemed 
to  have  consented  to  the  revocation  of  its  license,  per- 
mit or  franchise  by  the  commission  for  cause. 

§  103.  Municipal  ownership  and  operation — Sale  or 
lease  by  municipality. — Any  municipality  shall  have  the 
power,  subject  to  the  provisions  of  this  act,  to  construct 
and  operate  a  pubHc  utiHty  or  any  part  thereof.  Any 
municipahty  shall  have  the  power,  subject  to  the  pro- 
visions of  this  act,  to  purchase  by  an  agreement  with 
any  public  utihty  any  part  of  any  plant,  provided  that 
such  purchase  and  the  terms  thereof  shall  be  approved 
by  the  commission  after  a  hearing  as  provided  in  this 
act.  Any  municipality  shall  have  the  power,  subject 
to  the  provisions  of  this  act,  to  acquire  by  condemna- 
tion the  property  of  any  public  utiHty  actually  used  and 
useful  for  the  convenience  of  the  public  then  operating 
under  a  license,  permit  or  franchise  existing  at  the  time 
this  act  takes  effect  or  operating  in  such  municipality 
without  any  permit  or  franchise.  Any  municipality 
owning  or  operating  a  public  utiHty  shall  not   sell  or 


INDIANA   LAW.  89 1 

lease  the  same  without  the  approval  of  the  commission 
after  a  hearing. 

§  104.  Legal  proceedings  for  purchase  by  munici- 
pality.— If  the  municipality  shall  have  determined  to 
acquire  an  existing  plant  then  operating  under  a  li- 
cense, permit  or  franchise  existing  at  the  time  this  act 
takes  effect,  such  municipality  shall  bring  an  action  in 
the  circuit  court  of  the  county  where  such  utility  has 
its  principal  place  of  business  against  the  public  utility 
as  defendant  praying  the  court  for  an  adjudication  as  to 
the  necessity  of  such  taking  by  the  municipality.  The 
public  utility  shall  file  its  answer  to  such  complaint 
within  ten  (lo)  days.  Unless  the  parties  thereto  waive 
a  jury,  the  question  as  to  the  necessity  of  the  taking  of 
such  property  by  the  municipality  shall  be  as  speedily 
as  possible  submitted  to  a  jury. 

§  105.  Compensation  determined  by  commission 
after  public  hearing  and  notice. — The  commission  siiall 
thereupon  proceed  to  set  a  time  and  place  for  a  public 
hearing  upon  the  matters  of  the  just  compensation  to 
be  paid  for  the  taking  of  the  property  of  such  public 
utility  actually  used  and  useful  for  the  convenience  of 
the  public,  and  of  all  other  terms  and  conditions  of  the 
purchase  and  sale  and  shall  give  to  the  municipality 
and  the  public  utility  interested,  not  less  than  thirty 
(30)  days'  notice  of  the  time  and  place  when  and  where 
such  hearing  will  be  held,  and  such  matters  considered 
and  determined,  and  shall  give  like  notice  to  all  bond- 
holders, mortgagees,  lienors  and  all  other  persons  hav- 
ing or  claiming  to  have  any  interest  in  such  public 
utility  by  publication  of  such  notice,  once  a  week  for 
not  less  than  three  (3)  successive  weeks,  in  at  least 
one  (i)  newspaper  of  general  circulation  printed  in  the 
English  language  and  published  in  the  county  in  which 


892  PUBLIC   UTILITIES. 

such  public  utility  is  located,  which  publication  shall  be 
caused  to  be  made  by  the  municipality.  Within  a  rea- 
sonable time,  not  exceeding  one  (i)  year  after  the  time 
fixed  for  such  hearing  in  such  notice,  the  commission 
shall,  by  order,  fix  and  determine  and  certify  to  the 
municipal  council,  to  the  public  utility  and  to  any  bond- 
holder, mortgagee,  lienor  or  other  creditor  appearing 
upon  such  hearing,  just  compensation  to  be  paid  for  the 
taking  of  the  property  of  such  public  utility  actually 
used  and  useful  for  the  convenience  of  the  public  and 
all  other  terms  and  all  conditions  of  sale  and  purchase 
which  it  shall  ascertain  to  be  reasonable,  allowing  not 
exceeding  one  hundred  and  twenty  (120)  days  for  the 
payment  of  such  compensation.  The  compensation  and 
other  terms  and  conditions  of  sale  and  purchase  thus 
certified  by  the  commission  shall  constitute  the  com- 
pensation and  terms  and  conditions  to  be  paid,  followed 
and  observed  in  the  purchase  of  such  plant  from  such 
public  utility.  Upon  the  filing  of  such  certificate  with 
the  clerk  of  such  municipality  and  payment  of  the  com- 
pensation fixed  the  exclusive  use  of  the  property  taken 
shall  vest  in  such  municipality. 

§  106.  Appeal — Compensation  determined  by  cir- 
cuit court. — Any  public  utility  or  the  municipality  or 
any  bondholder,  mortgagee,  lienor  or  other  creditor  of 
the  public  utility,  being  dissatisfied  with  such  order, 
may  commence  and  prosecute  an  action  in  the  circuit 
or  superior  court  and  thereafter  may  appeal  to  the 
Supreme  Court  to  vacate  or  set  aside  such  order  or 
any  part  thereof,  as  provided  in  sections  78  to  86,  in- 
clusive, and  said  sections,  so  far  as  applicable,  shall 
apply  to  such  action.  In  all  such  appeals  to  the  circuit 
court,  the  question  of  compensation  shall  be  tried  and 
fixed  by  the  court  without  a  jury. 


INDIANA   LAW.  893 

§  107.  Order  sustained  by  court  binding. — If  the 
plaintiff  shall  not  establish  to  the  full  satisfaction  of  the 
court  that  the  compensation  fixed  and  determined  in 
such  order  is  unlawful  or  that  some  of  the  terms  or 
conditions  fixed  and  determined  therein  are  in  some 
particulars  unreasonable,  the  compensation,  terms  and 
conditions  fixed  in  said  order  shall  be  the  compensa- 
tion, terms  and  conditions  to  be  paid,  followed  and  ob- 
served in  the  purchase  of  said  plant  from  such  public 
utility. 

§  108.  Order  reversed  by  court  remanded  to  com- 
mission.— If  the  plaintiff  shall  establish  to  the  satisfac- 
tion of  the  court,  and  the  court  shall  adjudge  that  such 
compensation  is  unlawful  or  that  some  of  such  terms 
or  conditions  are  unreasonable,  the  court  shall  remand 
the  same  to  the  commission  with  such  findings  of  facts 
and  conclusions  of  law  as  shall  set  forth  in  detail  the 
reasons  for  such  judgment  and  the  specific  particulars 
in  which  such  order  of  the  commission  is  adjudged  to 
be  unreasonable  or  unlawful. 

§  109.  Reconsideration  and  modification  of  order  by 
commission. — If  the  compensation  fixed  by  the  previous 
order  of  the  commission  be  adjudged  to  be  unlawful, 
the  commission  shall  forthwith  proceed  to  set  a  re- 
hearing for  the  redetermination  of  such  compensation 
as  in  the  first  instance.  The  commission  shall  forthwith 
otherwise  alter  and  amend  such  previous  order  with  or 
without  a  rehearing,  as  it  may  deem  necessary,  so  that 
the  same  shall  be  reasonable  and  lawful  in  every  par- 
ticular. 

§110.  Power  of  municipal  councils  to  regulate  sub- 
ject to  review  by  commission. — Every  municipal  coun- 
cil shall  have  power,  (a)  to  determine  by  contract,  or- 


894  PUBLIC   UTILITIES. 

dinance  or  otherwise  the  quality  and  character  of  each 
kind  of  product  or  service  to  be  furnished  or  rendered 
by  any  pubHc  utility  furnishing  any  product  of  service 
within  said  municipality  and  all  other  terms  and  con- 
ditions not  inconsistent  with  this  act  upon  which  such 
public  utility  may  be  permitted  to  occupy  the  streets, 
highways  or  other  public  property  within  such  munici- 
pality, and  such  contract,  ordinance  or  other  determi- 
nation of  such  municipality  shall  be  in  force  and  prima 
facie  reasonable.  Upon  complaint  made  by  such  public 
utility  or  by  any  qualified  complainant  as  provided  in 
section  57  the  commission  shall  set  a  hearing  as  pro- 
vided in  sections  57  to  71,  and  if  it  shall  find  such  con- 
tract, ordinance  or  other  determination  to  be  unreason- 
able, such  contract,  ordinance  or  other  determination 
shall  be  void,  (b)  To  require  of  any  public  utility  by 
ordinance  or  otherwise  such  additions  and  extensions 
to  its  physical  plant  within  said  municipality  as  shall 
be  reasonable  and  necessary  in  the  interest  of  the  pub- 
lic, and  to  designate  the  location  and  nature  of  all  such 
additions  and  extensions,  the  time  within  which  they 
must  be  completed  and  all  conditions  under  which  they 
must  be  constructed  subject  to  review  by  the  commis- 
sion as  provided  in  subdivision  (a)  of  this  section,  (c) 
To  provide  for  a  penalty  for  noncompliance  with  the 
provisions  of  any  ordinance  or  resolution  adopted  pur- 
suant to  the  provisions  hereof,  (d)  The  power  and 
.authority  granted  in  this  section  shall  exist  and  be 
vested  in  said  municipalities,  anything  in  this  act  to  the 
contrary  notwithstanding:  Provided,  however,  When- 
ever after  a  request  by  petition  in  writing  of  any  pub- 
lic utility,  the  city  or  other  political  subdivision  or 
other  body,  having  jurisdiction  of  the  matter,  shall  re- 
fuse or  fail  for  a  period  of  thirty  (30)  days,  to  give  or 
grant  to  such  public  utility  permission  and  authority 
to  construct,  maintain  and  operate  any  additional  con- 


INDIANA  LAW.  895 

striiction,  equipment  or  facility  reasonably  necessary 
for  the  transaction  of  the  business  of  such  public  utility, 
and  for  the  public  convenience  or  interest,  then  such 
public  utility  may  file  a  petition  with  said  commission 
for  such  right  and  permission,  which  petition  shall  state 
with  particularity  the  construction,  equipment  or  other 
facility  desired  to  be  constructed  and  operated,  and 
show  a  reasonable  public  necessity  therefor,  and  also 
the  failure  or  refusal  of  such  city,  political  subdivision 
or  other  body  to  give  or  grant  such  right  or  permis- 
sion; and  the  commission  shall  thereupon  give  notice 
of  the  pendency  of  such  petition,  together  with  a  copy 
thereof,  to  such  city  or  other  political  subdivision  or 
body  of  the  time  and  place  of  hearing  of  the  matter 
set  forth  in  such  petition;  and  such  commission  shall 
have  power  to  hear  and  determine  such  matters  and  to 
give  or  grant  such  right  and  permission  and  to  impose 
such  conditions  in  relation  thereto  as  the  necessity  of 
such  public  utility  and  the  public  convenience  and  in- 
terest may  reasonably  require. 

§  III.  No  franks,  privileges  or  anything  of  value 
to  political  committees  or  candidates  —  Penalty.  —  No 
public  utility  or  any  agent  or  officer  thereof,  or  any 
agent  or  officer  of  any  municipality  constituting  a  pub- 
lic utility  as  defined  in  this  act,  shall  offer  or  give  for 
any  purpose  to  any  political  committee  or  any  member 
or  employe  thereof,  candidate  for,  or  incumbent  of 
any  office  or  position  under  the  constitution  or  laws  or 
under  any  ordinance  of  any  municipality  of  this  State, 
or  to  any  person  at  the  request,  or  for  the  advantage 
of  all  or  any  of  them,  any  frank  or  any  privilege  or 
thing  of  value  withheld  from  any  person  for  any  prod- 
uct or  service  produced,  transmitted,  delivered,  fur- 
nished or  rendered,  or  to  be  produced,  transmitted,  de- 
livered, furnished  or  rendered  by  any  public  utility  or 


isgb  PUBLIC   UTILITIES. 

any  free  product  or  service  whatsoever.  No  political 
committee  and  no  member  or  employe  thereof,  no  can- 
didate for  and  no  incumbent  of  any  office  or  position 
under  the  constitution  or  Islws  or  under  any  ordinance 
of  any  town  or  municipality  in  this  State,  shall  ask  for 
or  accept  from  any  public  utility,  or  any  agent  or  officer 
thereof,  or  any  agent  or  officer  of  any  municipality 
constituting  a  public  utility  as  defined  in  this  act,  or 
use  in  any  manner  or  for  any  purpose  any  frank  or 
privilege  withheld  from  any  person,  for  any  product  or 
service  produced,  transmitted,  delivered,  furnished  or 
rendered,  or  to  be  produced,  transmitted,  delivered,  fur- 
nished or  rendered  by  any  public  utility.  Any  violation 
of  any  of  the  provisions  of  this  section  shall  be  pun- 
ished by  imprisonment  in  the  state  prison  not  more 
than  five  (5)  years  nor  less  than  one  (i)  year  or  by 
fine  not  exceeding  one  thousand  dollars  ($1,000.00) 
nor  less  than  two  hundred  dollars   ($200.00). 

§  112.  No  discrimination  in  rates — Penalty. — If  any 
public  utility  or  any  agent  or  officer  thereof,  or  any 
officer  of  any  municipality  constituting  a  public  utility 
as  defined  in  this  act  shall,  directly  or  indirectly,  by 
any  device  whatsoever,  charge,  demand,  collect  or  re- 
ceive from  any  person,  firm  or  corporation  a  greater 
or  less  compensation  for  any  service  rendered  or  to  be 
rendered  or  for  any  service  in  connection  therewith 
than  that  prescribed  in  the  published  schedules  or  tar- 
iffs then  in  force  or  established  as  provided  herein,  or 
than  it  charges,  demands,  collects  or  receives  from  any 
other  person,  firm  or  corporation  for  a  like  and  con- 
temporaneous service,  such  public  utility  shall  be 
deemed  guilty  of  unjust  discrimination  which  is  hereby 
prohibited  and  declared  to  be  unlawful,  and  upon  con- 
viction thereof  shall  forfeit  and  pay  into  the  state 
treasury  not  less  than  one  hundred  dollars   ($100.00), 


INDIANA   LAW.  897 

nor  more  than  one  thousand  dollars  ($1,000.00),  for 
each  offense;  and  such  agent  or  officer  so  offending 
shall  be  deemed  guilty  of  a  misdemeanor  and  upon  con- 
viction thereof  shall  be  punished  by  a  fine  of  not  less 
than  one  hundred  dollars  ($100.00)  nor  more  than  one 
thousand  dollars  ($1,000.00)  for  each  offense,  or  im- 
prisonment in  the  state  prison  for  not  less  than  one 
year. 

§  113.  Discrimination  in  rates — Consideration  for 
rental  of  facilities. — It  shall  be  unlawful  for  any  public 
utility  to  demand,  charge,  collect  or  receive  from  any 
person,  firm  or  corporation  less  compensation  for  any 
service  rendered  or  to  be  rendered  by  said  public  utility 
in  consideration  of  the  furnishing  by  said  person,  firm 
or  corporation  of  any  part  of  the  facilities  incident 
thereto:  Provided.  Nothing  herein  shall  be  construed 
as  prohibiting  any  public  utility  from  renting  any  facil- 
ities, incident  to  its  business. 

§114.  Discrimination  and  preferences — Penalty — 
Exceptions. — If  any  public  utility  make  or  give  any 
undue  or  unreasonable  preference  or  advantage  to  any 
particular  person,  firm  or  corporation,  or  shall  subject 
any  particular  person,  firm  or  corporation  to  any  undue 
or  unreasonable  prejudice  or  disadvantage  in  any  re- 
spect whatsoever,  such  public  utility  shall  be  deemed 
guilty  of  unjust  discrimination  which  is  hereby  prohib- 
ited and  declared  unlawful.  Any  person,  firm  or  cor- 
poration violating  the  provisions  of  this  section  shall 
be  deemed  guilty  of  a  misdemeanor,  and  upon  convic- 
tion thereof  shall  be  punished  by  a  fine  of  not  less  than 
fifty  dollars  ($50.00),  nor  more  than  one  thousand  dol- 
lars ($1,000.00),  for  each  offense.  Nothing  in  this  act 
shall  prevent  a  public  utility  from  furnishing  free  or 
reduced  service  to  any  of  its  employes  nor  prevent  a 

57— Pub.  Ut. 


OpO  PUBLIC   UTILITIES. 

Street  railway  or  interurban  railway  from  granting  free 
or  reduced  transportation  to  any  persons  as  provided 
by  law  for  railroads  and  other  common  carriers. 

§  115.  Rebates,  concessions  or  discriminations — 
Penalty. — It  shall  be  unlawful  for  any  person,  firm  or 
corporation  knowingly  to  solicit,  accept  or  receive  any 
rebate,  concession  or  discrimination  in  respect  to  any 
service  in  or  affecting  or  relating  to  any  public  utility 
or  for  any  service  in  connection  therewith,  whereby  any 
such  service  shall,  by  any  device  whatsoever,  be  ren- 
dered free  or  at  a  less  rate  than  that  named  in  the 
published  schedules  and  tariffs  in  force  as  provided 
herein,  or  whereby  any  service  or  advantage  is  received 
other  than  is  herein  specified.  Any  person,  firm  or  cor- 
poration violating  the  provisions  of  this  section  shall 
be  deemed  guilty  of  a  misdemeanor  and  on  conviction 
thereof  shall  be  punished  by  a  fine  of  not  less  than  fifty 
dollars  ($50.00)  nor  more  than  one  thousand  dollars 
($1,000.00)   for  each  offense. 

§  116.  Liability  of  public  utility  for  damages  to 
party  injured  due  to  violation  of  this  law. — If  any  pub- 
lic utility  shall  do  or  cause  to  be  done  or  permit  to  be 
done  any  matter,  act  or  thing  in  this  act  prohibited 
or  declared  to  be  unlawful,  or  shall  omit  to  do  any  act, 
matter  or  thing  required  to  be  done  by  this  act,  such 
public  utility  shall  be  liable  to  the  person,  firm  or  cor- 
poration injured  thereby  in  the  amount  of  damages  sus- 
tained in  consequence  of  such  violation:  Provided, 
That  any  recovery  as  in  this  section  provided  shall  in 
no  manner  affect  a  recovery  by  the  State  of  the  penalty 
prescribed  for  such  violation. 

§  117.  Information,  papers  or  records  and  account- 
ing to  be  furnished  commission — Penalty. — Any  officer, 


INDIANA   LAW.  899 

agent  or  employe  of  any  public  utility  or  of  any  mu- 
nicipality constituting  a  public  utility  as  defined  in  this 
act  who  shall  fail  or  refuse  to  fill  out  and  return  any 
blanks  as  required  by  said  act,  or  shall  fail  or  refuse  to 
answer  any  question  therein  propounded,  or  shall 
knowingly  or  wilfully  give  a  false  answer  to  any  such 
question  or  shall  evade  the  answer  to  any  such  question 
where  the  fact  inquired  of  is  within  his  knowledge  or 
who  shall,  upon  proper  demand,  fail  or  refuse  to  exhibit 
to  the  commission  or  any  commissioner  or  any  person 
authorized  to  examine  the  same,  any  book,  paper,  ac- 
count, record  or  memoranda  of  such  public  utility 
which  is  in  his  possession  or  under  his  control  or  who 
shall  fail  to  keep  his  system  of  accounting,  or  any  part 
thereof,  which  shall  be  required  by  the  commission,  or 
who  shall  refuse  to  do  any  act  or  thing  in  connection 
with  such  system  of  accounting  when  so  directed  by 
the  commission  or  its  authorized  representative,  shall 
be  deemed  guilty  of  a  misdemeanor  and  upon  convic- 
tion thereof  shall  be  punished  by  a  fine  of  not  less  than 
one  thousand  dollars  ($1,000.00)  for  each  offense.  And 
a  penalty  of  not  less  than  five  hundred  dollars  ($500.00) 
nor  more  than  one  thousand  dollars  ($1,000.00)  shall 
be  recovered  from  the  public  utility  for  each  such  of- 
fense when  such  officer,  agent  or  employe  acted  in 
obedience  to  the  direction,  instruction  or  request  of 
such  public  utility  or  any  general  officer  thereof. 

§  1 1 8.  Violations  and  penalties  in  general — Agency. 
If  any  public  utility  shall  violate  any  provision  of  this 
act,  or  shall  do  any  act  herein  prohibited  or  shall  fail 
or  refuse  to  perform  any  duty  enjoined  upon  it,  for 
which  a  penalty  has  not  been  provided,  or  shall  fail, 
neglect  or  refuse  to  obey  any  lawful  requirement  or 
order  made  by  the  commission  or  the  municipal  council 
or  any  judgment  or  decree  made  by  any  court  upon  its 


900  PUBLIC   UTILITIES. 

application,  for  every  such  violation,  failure  or  refusal, 
such  public  utility  shall  forfeit  and  pay  into  the  treasury 
a  sum  not  less  than  one  hundred  dollars  ($100.00)  nor 
more  than  one  thousand  dollars  ($1,000.00)  for  each 
such  offense.  In  construing  and  enforcing  the  provi- 
sions of  this  section,  the  act,  omission  or  failure  of  any 
officer,  agent  or  other  person  acting  for  or  employed 
by  any  public  utility  acting  within  the  scope  of  his  em- 
ployment shall  in  every  case  be  deemed  to  be  the  act, 
omission  or  failure  of  such  public  utility. 

§  119.     Delinquency  of  municipal  ofHcers — Penalty. 

— If  any  officer  of  any  town  or  city  constituting  a  pub- 
lic utility,  as  defined  in  this  act,  shall  do  or  cause  to  be 
done  or  permit  to  be  done  any  matter,  act  or  thing  in 
this  act  prohibited  or  declared  to  be  unlawful,  or  shall 
omit,  fail  or  neglect  or  refuse  to  do  any  act,  matter  or 
thing  required  by  this  act  of  such  officer  to  be  done, 
or  shall  omit,  fail,  neglect  or  refuse  to  perform  any 
duty  enjoined  upon  him  and  relating  directly  or  indi- 
rectly to  the  enforcement  of  this  act,  or  shall  omit,  fail, 
neglect  or  refuse  to  obey  any  lawful  requirement  or 
order  made  by  the  commission  or  any  judgment  or  de- 
cree made  by  the  court  upon  its  application,  for  every 
such  violation,  failure  or  refusal,  such  officer  shall  be 
deemed  guilty  of  a  misdemeanor,  and  upon  conviction 
thereof  shall  be  punished  by  a  fine  of  not  less  than 
fifty  dollars  ($50.00)  nor  more  than  five  hundred  dol- 
lars ($500.00). 

§  120.  Interference  or  injury  of  equipment  of  com- 
mission prohibited — Penalty. — Any  person  who  shall 
destroy,  injure  or  interfere  with  any  apparatus  or  ap- 
pliance owned  or  operated  by  or  in  charge  of  the  com- 
mission or  its  agent  shall  be  deemed  guilty  of  a  mis- 
demeanor, and  upon  conviction  shall  be  punished  by  a 


INDIANA   LAW.  9OI 

fine  not  exceeding  one  hundred  dollars  ($100.00)  or 
imprisonment  for  a  period  not  exceeding  thirty  (30) 
days,  or  both.  Any  public  utility  permitting  the  de- 
struction, injury  to,  or  interference  with  any  such  ap- 
paratus or  appliance  shall  forfeit  a  sum  not  exceeding 
one   thousand  dollars    ($1,000.00)    for  each   offense. 

§  121.  Separate  and  distinct  violations — Daily. — 
Every  day  during  which  any  public  utility  or  any  offi- 
cer, agent  or  employe  thereof  shall  fail  to  observe  and 
comply  with  any  order  or  direction  of  the  commission, 
or  to  perform  any  duty  enjoined  by  this  act,  shall  con- 
stitute a  separate  and  distinct  violation  of  such  order 
or  direction  of  this  act,  as  the  case  may  be. 

§  122.  Temporary  alteration  or  suspension  of  rates 
by  commission  in  emergencies. — The  commission  shall 
have  power,  when  deemed  by  it  necessary,  to  prevent 
injury  to  the  business  or  interests  of  the  people,  or  any 
public  utility  of  this  State,  in  case  of  any  emergency  to 
be  judged  of  by  the  commission,  to  temporarily  alter, 
amend  or  with  the  consent  of  the  public  utility  con- 
cerned, suspend  any  existing  rates,  schedules  and  order 
relating  to  or  affecting  any  public  utility  or  part  of  any 
public  utility  in  this  State.  Such  rates  so  made  by 
the  commission  shall  apply  to  one  (i)  or  more  of  the 
public  utilities  in  this  State  or  to  any  portion  thereof 
as  may  be  directed  by  the  commission,  and  shall  take 
effect  at  such  time  and  remain  in  force  for  such  length 
of  time  as  may  be  prescribed  by  the  commission. 

§  123.  Notice  of  fatal  accidents— Investigation  by 
commission. — Every  public  utility  shall,  whenever  an 
accident  attended  with  loss  of  human  life  occurs  within 
this  State  upon  its  premises,  or  directly  or  indirectly 
arising:  from  or  connected  with  its  maintenance  or  op- 


902  PUBLIC    UTILITIES. 

eration,  give  immediate  notice  thereof  to  the  commis- 
sion. In  the  event  of  any  such  accident,  the  commis- 
sion, if  it  deem  the  pubHc  interest  require  it,  shall  cause 
an  investigation  to  be  made  forthwith,  w^hich  investi- 
gation shall  be  held  in  the  locality  of  the  accident  un- 
less, for  greater  convenience  of  those  concerned,  it  shall 
order  such  investigation  to  be  held  at  some  other 
place;  and  said  investigation  may  be  adjourned  from, 
place  to  place  as  may  be  found  necessary  and  conven- 
ient. The  commission  shall  give  due  notice  to  the  pub- 
lic utility  of  the  time  and  place  of  the  investigation. 

§  124.  Enforcement  of  law  by  commission — Recov- 
ery of  forfeiture  and  penalties. — The  commission  shall 
inquire  into  any  neglect  or  violation  of  the  laws  of 
this  State  or  the  ordinances  of  any  city  or  town  by  any 
public  utility  doing  business  therein,  or  by  the  officers, 
agents  or  employes  thereof  or  by  any  person  operating 
the  plant  of  any  public  utility,  and  shall  have  the  power, 
and  it  shall  be  its  duty,  to  enforce  the  provisions  of 
this  act,  as  well  as  all  other  laws,  relating  to  public 
utilities.  Any  forfeiture  or  penalty  herein  provided 
shall  be  recovered  and  suit  therein  shall  be  brought 
in  the  name  of  the  State  of  Indiana  in  the  circuit  or 
superior  court  where  the  public  utility  has  its  principal 
place  of  business.  Complaint  for  the  collection  of  any 
such  forfeiture  may  be  made  by  the  commission  or  any 
member  thereof,  and  when  so  made  the  action  so  com- 
menced shall  be  prosecuted  by  the  general  counsel. 

§  125.  Substantial  compliance  sufficient  to  make 
orders  effective. — A  substantial  compliance  with  the  re- 
quirements of  this  act  shall  be  sufficient  to  give  effect 
to  all  the  rules,  orders,  acts  and  regulations  of  the  com- 
mission and  they  shall  not  be  declared  inoperative,  il- 


INDIANA    LAW. 


903 


legal  or  void  for  any  omission  of  a  technical  nature  in 
respect  thereto. 

§  126.  Penalties  and  forfeitures  supplementary  cind 
cumulative. — This  act  shall  not  have  the  efTect  to  re- 
lease or  waive  any  right  of  action  by  the  State  or  by 
any  person  for  any  right,  penalty  or  forfeiture  which 
may  have  arisen  or  which  may  hereafter  arise,  under 
any  law  of  this  State;  and  all  penalties  and  forfeitures 
accruing  under  this  act  shall  be  cumulative  and  a  suit 
for  any  recovery  of  one  shall  not  be  a  bar  to  the  re- 
covery of  any  other  penalty. 

§  127.  Traveling  expenses  of  members  and  em- 
ployes of  commission  paid  by  state  on  itemized  verified 
statement. — The  members  of  said  commission,  its  sec- 
retary and  clerk,  and  such  other  person  as  it  may  ap- 
point or  employ  as  provided  in  this  act,  shall  be  en- 
titled to  receive  from  the  State  their  actual  necessary 
traveling  expenses,  which  shall  include  the  cost  of 
transportation,  hotel,  telegraph  and  telephone  bills 
while  traveling  on  the  business  of  the  commission, 
which  amount  shall  be  paid  by  the  treasurer  of  state 
on  warrants  of  the  auditor  of  state,  upon  an  itemized 
statement  thereof,  sworn  to  by  the  party  who  incurred 
such  expense  in  traveling,  and  after  the  same  shall 
have  been  approved  by  the  commission. 

§  128.  Appropriation  annual. — A  sum  sutticiont  to 
carry  out  the  provisions  of  this  act  is  appropriated  an- 
nually, out  of  any  money  in  the  state  treasury  not  other- 
wise appropriated,  not  exceeding  seventy-five  thousand 
dollars  ($75,000.00).  The  sum  of  twenty-five  thousand 
dollars  ($25,000.00)  is  hereby  appropriated  for  the  pe- 
riod from  April  i,   1913,  to  September  30,   1913. 


904  PUBLIC    UTILITIES. 

§  129.  When  act  effective. — This  act  shall  take  ef- 
fect and  be  in  force  from  and  after  May  i,  1913. 

§  130.  Acts  in  conflict  repealed. — All  acts  and  parts 
of  acts  conflicting  with  the  provisions  of  this  act  are 
repealed  in  so  far  as  they  are  inconsistent  herewith. 

§  131.     Any  invalid  provisions  not  to  affect  others. 

— In  case  any  of  the  provisions  of  this  act  shall  be  held 
invalid,  such  fact  shall  not  operate  to  make  invalid  any 
other  part  of  this  act,  and  the  parts  of  this  act  not  ad- 
judged to  be  invalid  shall  be  observed  and  enforced 
the  same  as  though  the  invalid  part  or  parts  had  not 
been  enacted. 


INDEX 


[References  are  to  Sections.] 


ABANDONMENT  OF  SERVICE, 
agreement  of  parties,  379. 

ABUSE   OF  DISCRETION, 

limitation  of  regulation,  450. 

ABUTTING    PROPERTY    OWNERS, 

additional  servitudes  of  municipal  public  utility  plants,  277,  283, 

285,  289,  291,  293,  298,   300,  302-304,   307,   312-315. 
duty   of  municipal   public  utility,   203,   204. 
special  assessment  for  municipal  public  utilities,  540. 

ACCEPTANCE   OF  FRANCHISES, 

municipal  public  utilities,  375,  376,  377. 
necessary,   108. 

ACCESS,   LIGHT   AND    AIR    PRIVILEGES, 
inhabitants  of  municipality,  524,  526. 

ACTION   BY   THE   PEOPLE, 

enforcement    of    franchises    requires    system    and    information, 

590,    593,    600. 
franchise  and  contract  rights  enforced,   587,  590,  594,   600. 

ACTIVITY   OF  MUNICIPAL   CORPORATIONS, 

Inhabitants   of  municipal   corporations   unrestrained.   pa«:e   1. 

ADDITIONAL    SERVITUDES, 
defined.   277-315. 
eminent   domain.   277.   300. 
municipal   public   utility   plants,   277,   279-315. 

ADEQUATE  REGULATION  AND  CONTROL, 

alternative  and  preventive  of  municipal  ownership.  572.  576-579. 
state  public  utility  commission.  607-610,  612. 

ADEQUATE    SERVICE   AT   UNIFORM    RATES, 

secured  by  public  utility  commission.  608-610,  612. 


go6  INDEX. 

[References  are  to  Sections.} 

AGENCY, 

municipality  of  state,  88,  90,  96,  97,  101,  127,  128,  134,  135,  190, 
193,  265,  270,  275,  390-392,  398-400,  402,  439-441,  481,  573-575. 

ALIENATION   OF   PROPERTY, 

providing  municipal  public  utilities,  346-367. 

ALIENATION   OR   OBSTRUCTION   OP   STREETS, 
power  of  municipality,  406. 

ATTITUDE   OF   COURTS, 

construction  of  municipal  purposes,  19. 

extension  of  municipal  public  utilities,  284-286,  288-297,  301,  305, 

306,  308-311. 
increase  of  sphere  of  municipal  activity,  page  3,  §§  13,  18,  23, 

24,  29,  31,  33,  35,  37,  38,  43,  44,  49,  51-65,  64,  316,  346-348,  352, 

355,  356,   359-361,  428,  578-585. 

municipal  ownership,  page  6,  §§  75,  119,  121,  346-348,  352,  355, 

356,  359-361,  449. 
municipal  public  utilities,  19. 

power  of  municipality  to  grant  franchises,  428,  430,  431. 
public  utility  commissions,  606-610,  612. 

AUCTION, 

municipal  franchise  rights,  105,  138. 

AUTHORITY     TO    ALIENATE     MUNICIPAL    PUBLIC    UTILITY 
PROPERTY, 

statutory,  348,  350-354,  361,  362,  367. 


BENEFICIARIES   OF  MUNICIPAL  FRANCHISES, 
inhabitants  of  municipality,  191-196,  199,  201,  205. 

BENEFICIARY, 

municipal  consent  in  street  franchise,  106. 

BRICK-MAKING, 

contract  of  municipality,  60. 

BROOKLYN  BRIDGE, 
municipal  purpose,  22. 

BUSINESS  POWERS, 

municipal  corporations,  5,  6,  7,  9. 


INDEX.  907 

[References  are  to  Sections. \ 

C 

CAPACITY    OF   MUNICIPAL   PUBLIC   UTILITIES, 
limitation   of  demand,  454. 

CAPITALIZATION, 

coinciding  with  investment,  page  12. 

economy  and' efficiency,  pages  11,  12. 

fair  dealing,  pages  11,  12. 

general  welfare,  pages  11,  12. 

regulated  for  customer  and  investor,  pages  11,  12. 

state  control,  481,  482,  483. 

CAPITALIZATION  AND  EXPENDITURES  OF  MUNICIPAL  PUB- 
LIC   UTILITIES, 
state  regulation  and  control,  605. 

CAPITALIZATION   AND   INVESTMENT, 

distinguished,   480-483,   485,   488,   493,   496. 

CAPITALIZATION   OF   MUNICIPAL   PUBLIC   UTILITIES, 
regulation  by  public  utility  commission,  pages  11,  12. 

CEMETERY, 

contract   of  municipality,  4. 

CHARGES, 
See  Rates. 

CHARITIES, 

rate  concessions  for  service,  223. 

CHARTER   RIGHTS. 

protected  against  undue  exercise  of  police  power,  438. 

CHARTERS, 

franchises,  87,  88,  133,  134,  135. 

CHARTERS  OF  MUNICIPAL  CORPORATIONS, 

construction.  10,  12,  64. 

CITIES  AND  TOWNS, 

See  Municipal  Corporations. 

CLASSIFICATION. 

municipal   public  utility   service.  213,   216,  218  229. 
telephone  service,  556.  570,  571. 

COAL  AND  WOOD, 

contract  of  municipality,  61. 


908  INDEX. 

[References  are  to  Sections.] 

COLISEUM, 

contract  of  municipality,  64. 
municipal   purpose,   64. 

COMMERCIAL  ENTERPRISES  CONTROLLED  BY  COMPETITION, 
municipal  purposes  and  natural  monopolies  the  limitation  of 
municipalities,   55-63. 

COMPETITION, 

contract  to  defeat  void  unless  necessary,  157,  158,  159,  161,  163. 

extravagant  and  inefficient  means  of  regulation,  pages  10,  11. 

franchise  not  exclusive  by  implication,  page  5. 

good  will,  461,  471,  472. 

inadequate  and  expensive  means  of  regulation,  603-610,  612. 

municipal  public  utilities,  118,  119,  121,  122,  209,  210,  212,  217. 

not  excluded  by  implication,  104,  105,  132,  135-137,  139,  142,  157, 

158. 
public  regulation  and  control,  209-213,  215-218,  221,  222,  225. 
public  utility  commission  supplants,  pages  10,  11. 
rates  of  municipal  public  utilities,  456,  458,  461,  464,  471-473. 
regulation  and  control  inadequate  for  natural  monopoly,  pages 

5,  6. 
regulation  and  control  insufficient,  417,  430. 
regulation  of  private  business,  55,  58,  60,  61,  63. 
supplanted   by   state   regulation,   603-610,   612. 
telephone  service  extravagant  and  unsatisfactory,  546-549,  557, 

568. 

COMPETITION  IN  TELEPHONE  SERVICE, 

unsound  economically  and  practically,  547,  548,  549. 

COMPETITION     OF     MUNICIPAL     CORPORATION     AND     INDI- 
VIDUAL, 
natural  monopolies  the  limitation,  55-63. 

COMPETITION   OF  MUNICIPAL   PUBLIC   UTILITIES, 
contracts  to  destroy  invalid,  363,  364,  365. 

COMPETITIVE    FRANCHISES    AND    FRANCHISE    CONTRACTS, 
distinguished  under  constitution,  134-136,  146,  157,  164. 

CONDITIONAL    FRANCHISES, 
construed  strictly,  126. 
strictly  construed   and  enforced,  139,   140,  141,   142. 

CONSENT   OF  MUNICIPAL  CORPORATIONS, 
limitation  of  reasonableness.  111,  112,  113,  114. 


INDEX.  909 

[References  are  to  Sections.] 

CONSENT   OF   MUNICIPAL   CORPORATIONS— OonfifHj«d. 

municipal  public  utility  grants,  89-93,  95,  97-99,  105,  106,  113, 

114. 
public  convenience  the  limitation,  page  11. 
rate   regulation  on  grant  of  street  privileges,  420-438. 
rate  regulation  remains  open,  515-518,  521-523. 
rates  of  municipal  public  utilities,  499,  500,  503-506,  508,  510-512, 

515-523. 
regulation   of   municipal    public   utilities,   393,   395-398,   404-406, 

408-413. 
street  franchises,  389-393,  404,  405,  406,  408. 
streets,  524-527,  536,  537,  540-542,  545. 

CONSERVATION   OF   PROPERTY, 

municipal  public  utilities,  382,  383,  388. 

CONSTITUTIONAL   GUARANTY    OF   JUST   COMPENSATION, 
condition  of  right  to  exercise  eminent  domain,  575. 

CONSTITUTIONAL    LIMITATION, 
attempts  to  evade.  67. 

convention  hall  of  municipal  public  utility,  27. 
franchise  of  municipality  and  state,  128. 
improvidence   of   municipality,   66,   68. 
municipal  indebtedness,  65,  66. 
municipal  Indebtedness  defined,  66,  68. 
powers  of  municipality,  17. 
state  franchises,  167. 

CONSTITUTIONAL   PROVISIONS, 

franchise  rights  contracts,  89,  90,  92,  93,  95,  97,  98,  112,  113. 

"home  rule"  for  municipality,  page  9,   §§  64,  600. 

Increase  of  sphere  of  municipal  activity,  page  2. 

municipal  ownership,  page  4,  §§  574-576,  578,  580-585. 

physical  connection  of  telephone  plants,  551,  554,  557,  55S,  565. 

police  power,  page  2. 

taxation  of  property  of  municipalities,  316,  317,  318,  319. 

CONSTITUTIONAL     PROVISIONS     PROTECTING     VESTED     IN- 
TERESTS, 
limitation   on  rates,  497. 

CONSTRUCTION, 

municipal  charters.  10,  12,  64. 
private  proprietary  powers.  13. 

CONSTRUCTION    OF    MI^NICIPAL    FRANCHISES, 

duration  varies  and  Is  discretlonan'.  170-173,  175-1S2.  1S4,  186. 


910  INDEX. 

[References  are  to  Sections.] 

CONSTRUCTION  OF  MUNICIPAL  FRANCHISES— Confirmed. 

not   exclusive   by  implication,  104,   132,   133,   136,  137,   139,  140. 
strictly  against  grantee,  104,  132,  133,  136,  137,  139,  140. 

CONSUMERS  OF  SERVICE, 

protection  of  state  control  of  capitalization,  605. 

CONSUMERS   OF  WATER   SERVICE, 

fire  loss  recovery,  231-233,  237-241,  247,  248,   260,  262,   263. 

CONTRACT  AND  FRANCHISE  RIGHTS, 

expense  of  maintenance  and  operation,  587. 

necessary   investment,  587. 

necessary  preliminary  information,   587. 

CONTRACT  FOR  EXCLUSIVE  SERVICE, 
monopolistic  and  void,  159,  161. 

CONTRACT    FOR   EXCLUSIVE    TELEPHONE    SERVICE, 
limitation   of  necessity,  563,  564. 

CONTRACT   FOR   WATER, 

inhabitants  real   party  interested,   230-233,   237-241,   243-248. 
municipal   corporations,  5. 

CONTRACT   OF  MUNICIPALITY   FOR   EXEMPTION, 
strictly  construed  invalid,  344,  345. 

CONTRACT  RIGHTS, 

protected  by  federal  constitution  against  state  constitution,  115. 
strict  enforcement  necessary,  586-601. 

CONTRACTS, 

beneficiary  may  recover,  231,  232,  235,  259. 

business  powers   of  municipality,   6. 

general  or  special  franchises,  87,  88,  92,  93,  95. 

municipal  franchises,  133,   134,   135,   137,   140,   142. 

municipal  water-works,  6. 

private  proprietary  powers,  5,  6. 

protected  against  undue  exercise  of  police  power,  438. 

public  powers  of  municipality,  5. 

rate  regulation   suspended,   424,   426,   436,  437. 

CONTRACTS   AND   VESTED    INTERESTS, 
constitutional  protection,  115,  116. 

CONTRACTS  FOR  MUNICIPAL  PUBLIC  UTILITY  SERVICE, 

discretion  of  municipal  officers,  144,  147,  148,  150,  151,  162,  163. 
duration  of  contract,  144,  148,  150-155,  162,  163,  166. 
exemption  from  taxation  by  municipality,  332,  340-345. 


INDEX.  911 

[References  are  to  Sections.] 

CONTRACTS  FOR  TELEPHONE  SERVICE, 

exclusive  service  in  restraint  of  trade,  552,  560,  563,  564,  571. 

CONTRACTS   FOR   WATER-WORKS   SERVICE, 

inhabitants  of  municipality   not  parties,  236,  249-252,  259,  262, 

263. 
recovery  in  contract,  249,  250,  252,  255,  256,  25S-261,  263. 

CONTRACTS   OF   MUNICIPAL   CORPORATIONS, 
anticipation  of  future  needs,  15. 
drainage  of  private  land,  3. 

enforcement  of  rights  essential  for  adequate  service,  page  7. 
fire  loss,  3. 
gas  works,  11. 

lease  for  cemetery  purposes,  4. 
leasing  of  vacant  rooms,   15. 
leasing  or  sale  of  excess  capacity,  58,  62. 
limitation,  15. 

maintenance  of  street  perpetually,  3. 
obstructions  in  streets,  541. 
power  to  fix  rates,  426,  427,  428,  433. 
proprietary  or  commercial,  3. 
public  entertainment,   14. 
rate  fixed  for  reasonable  period,  426,  427,  428. 
rate  regulation  distinguished,  433,  434,  435,  436. 
rate  regulation  on  grant  of  street  privileges,  420-438. 
surplus  electric  power,  15. 
surplus  water  supply,  15. 
suspending  rate  regulation  strictly  construed,  498,  502-505,  511, 

513-518,   520,  523. 
water  supply,  11,  12. 

CONTRACTS   OF   MUNICIPAL    PUBLIC    UTILITIES, 
acceptance  of  municipal  consent,  431,  432.  436,  437. 
dividing  territory  void  as  defeating  competition.  159.  160,  161. 

CONTROL   OF  MUNICIPAL  CORPORATIONS, 

streets,   524-527.  536,  537,   540-542.  545. 

CONVENTION  HALL, 
municipal  purpose,  27. 

CORPORATIONS, 

franchise  right  granted  by  state,  87. 

COST  OF  SERVICE, 
See  Rate:s. 

classification,  226,  228. 
reasonableness  of  rates,  446.  447,  4.')1,  452,  454.  456. 


912  INDEX. 

[References  are  to  Sections.} 

COST   OP  TELEPHONE   SERVICE, 

increased  by  competition,  547,  548,  549. 

increases  with  number  of  subscribers,  555,  570,  569. 

COURTS, 

arbitrator   of   street   rights,   101. 

attitude  to  municipal  and  private  ownership,  page  6. 

attitude  to  municipal  ownership  favorable,  page  6. 

attitude  toward  municipal  ownership  and  control,  page  3 

decisions  on  municipal  public  utilities  recent,  page  12. 

liberal  construction  of  powers  of  municipality,  page  4. 

municipal  ownership,  578-585. 

municipal  public  utilities   modern,  page   12. 

public  utility  commissions,   606,   607,   608,   609,   610,   612. 

reasonableness    of   rates,    determine,   442,   444-451. 

CURRENT  REVENUE  PAYMENTS, 

municipal  public  utilities,  68,  69,  75,  83,  84,  86. 

CUSTOMER  OF  MUNICIPAL  PUBLIC  UTILITIES, 
measurement  of  service,  533,  539. 


DECISIONS   ON   MUNICIPAL   PUBLIC   UTILITIES, 
basis  of  treatise,  page  12. 
recent  and   frequently   conflicting,   page   12. 

DEDICATION, 

streets  and  highways  to  public,  89. 

DEPRECIATION  OR  OBSOLESCENCE, 

effect  of  invention  and  improvements,  460,  467,  468. 
operation  not  capital  account,  467,  468,  469,  470. 
rates,  456,  460,  466-470. 

DISCRETION  OP  MUNICIPAL  CORPORATIONS, 
limitation,  16. 

limited  by  fraud  or  abuse,  11. 
municipal   bridges,   22. 
municipal   electric   light  plant,  21. 
municipal  public  utilities,  16,  31,  350,  355-360. 
municipal   water-works,   20. 
rapid  transit  system  or  pure  air,  23. 
contract  for  municipal  public  utility  service,  144,  147,  148,  150, 

151,  162,  163. 
defined,  15. 


INDEX.  913 

[Referejices  are  to  Sections.] 

DISCRETION    OP   MUNICIPAL    CORPORATIONS— <7ontifi««d. 

duration   of   franchise,   172,   17S,   179,   180,  1S2. 

fixing  rates  of  municipal   public  utilities,  440,   441,  450. 

franchise  of  municipal  public  utilities,  127. 

limitation  of  power  to  fix  rates,  450. 

limited  by  fraud  or  abuse,  13,  144,  147,  14S,  162,  163. 

DISCRIMINATIONS, 

rates  municipal  public  utilities,  210,  212,  213,  215,  218.  219,  221. 

222,   223,  225-229. 
service    of    municipal    public    utilities,   208-229. 
telephone  service,  551-554,  557,  559-562. 

DISCRIMINATIONS   IN   SERVICE, 

inadequate   supply   no  justification,   224,  225. 
reasonable  classifications,  213,  216,  218-229. 

DISTRIBUTION  OF  COST, 

municipal   public  utilities.   67. 

streets,  boulevards  and  public  buildings,  67. 

DIVISION  OF  TERRITORY. 

contract  void   as  destroying  competition,   159,   160,   161. 

DOCTRINE  OF  INCREASING  COST  OF  SERVICE, 

telephones,   569,    570. 

DRAINAGE, 

contract  of  municipality,  3. 

DUPLICATED   TELEPHONE   SERVICE. 

extravagant  and  unsatisfactory.  546-549.  557.  56S. 
inadequate  or  incomplete,  546-549,  557,  568. 

DURATION  OF  CONTRACTS, 

municipal  public  utility  service,  144,  148,  150-155,  162,  163.  166. 

DURATION   OF   FRANCHISES, 

discretion  of  municipality,  127,  128. 

limited  to  life  of  grantor,  103. 

municipal  public  utilities,  120. 

power  of  municipality  to  fix,  90. 

power  of  state  to  make  perpetual.  167.  174,  175.  1S8. 

waiver  or  acquiescence.  378.  386. 

DURATION   OF   MUNICIPAL   FRANCHISES. 

not   perpetual   by   implication.   168,   169,   170,   172,    175-182.   184, 

185. 
58— Pub.  Ut. 


914  INDEX. 

[References  are  to  Sections.1 

DUTY  OF  MUNICIPAL,  OFFICERS, 

municipal  public  utilities,  pages  7,  8,  9. 

street  franchises  of  municipal  public  utilities,  391-394,  402,  403, 
404,  409,  410,  413. 

E 

EARNINGS   OF  MUNICIPAL,  PUBLIC   UTILITIES, 
replacements   and  depreciation,  469,   470,   472. 

ECONOMY   OF  MUNICIPAL   CORPORATIONS, 
contract  for  surplus  power  or  water,  15. 

public  and  private  supply  of  municipal  public  utilities,  45,  46, 
47,   48,   57. 

ELECTRIC  LIGHT  PLANTS, 
contract  of  municipality,  5. 
implied  power  of  municipality,  39,  44. 
municipal  purpose,  21,  28. 
no  additional  servitudes,  293,  301. 
power  of  municipality,  33. 

power  of  municipality  to  furnish  public  supply,   49-54. 
public  convenience,   44,   49,   50,   51,   53,   54. 

EMINENT  DOMAIN, 

available  to  municipality  or  state  at  all  times,  573,  574,  575. 

municipal  corporations,  189,  403. 

municipal  ownership,  573,  574,  575. 

municipal  public  utilities  public  purposes,   327,   328. 

municipal  public  utility  plants,  277,   300. 

municipal  public   utility   service,  224. 

valuation   of  municipal   public  utilities,   475. 

ENFORCEMENT   OF   FRANCHISE   RIGHTS, 

duty  of  municipality,   500,   501,   510,   518,  521-523. 

EQUIPMENT   OF   MUNICIPAL   CORPORATIONS, 

municipal  public  utilities,  525,  526,  529,   530,   534,   535,   538. 

EQUIPMENT  OF  MUNICIPAL  PUBLIC  UTILITIES, 

additional  servitude  to  abutting  property  owner,  277,  283,  285, 

289-291,   293,   298,   300,   302-304,   307,   312-315. 
concentrated  to  one  system,  525,  527. 
municipal  regulation   and   control,   524-545. 
municipal  regulations  must  be  reasonable,  524-527,  541-545. 
removal  on  forfeiture  or  expiration  of  franchise,  384,  385,  386 

387,    388. 
streets,  524-527,  536,  537,  540-542,  545. 
underground    conduits,    525,    526,   545. 


INDEX. 


[References  are  to  Sectiona.} 


915 


EXCESS   ELECTRIC   POWER, 
contract  of  municipality,  15. 

EXCESS   WATER  SUPPLY, 

contract  of  municipality,  13,  15. 

EXCESSIVE  CONTRACT, 

void  as  tending  to  monopoly,   154,   162. 

EXCLUSIVE  FRANCHISES, 

express   authority   necessary,   405,   409. 
indeterminate  under  state  regulation,  604,  608,  609. 
necessity  the  limitation,  131. 

EXCLUSIVE   SERVICE, 

contract  creating  monopoly  void,  159,  161. 
monopolistic,  217. 

EXEMPTION   FROM    TAXATION, 

consideration  must  be  reasonable,  342. 

contract  for  service  not  an  exemption,  341,  342,  345. 

contract  of  municipality,  332,  340-345. 

municipal    property    providing    municipal    public    utilities,    316, 

319,  321-345. 
municipal   purposes   of  municipal   public   utilities,  325. 
property  of  municipality  producing  revenue,  323,  324,  331,  332, 

333,   337,   338. 
public    purposes    of    municipal    public    utilities,    321,    322,    324- 

327,  331. 
two  capacities  of  municipality,  333-339. 

EXPENDITURES    OF   MUNICIPAL    PUBLIC    UTILITIES, 
controlled  by  state,  605. 

EXPIRATION   OF   FRANCHISES, 

property  of  municipal  public  utilities,  368-371,  380,  3S3,  385,  386, 

387. 

EXPIRATION   OR   FORFEITURE   OF  FRANCHISES, 
property   of   municipal    public   utilities,   36S-38S. 
rights  and  relation   of  parties,  368-372,  376,  380-384,  386-388. 


FACTS, 

reasonableness  of  rates,   455. 


9l6  INDEX. 

[References  are  to  Sections.] 

FIRE  LOSS, 

recovery  by  consumers  of  water  service,  231-233,  237-241,  247, 

248,  260,  262,  263. 
water-works,  230-263. 

FIRE  LOSS  OF  WATER- WORKS, 

contract  expressly  covering,  248,  252,  255,  259,  260,  263. 

FIRE  PROTECTION, 

liability  of  municipality,  266. 

FIRES, 

contract    of   municipality,    3,    4. 

FORCED  SALE  ON  EXECUTION, 

municipal  public  utility  property,  366. 

FORFEITURE  FOR  NON-USER, 

franchises   of  municipal  public  utilities,   372,   373,   375,   377. 
makes  field  available  for  other  franchises,  372,  373. 

FORFEITURE  OF  FRANCHISES, 

property  of  municipal  public  utilities,  368,  372,  373,  377,  378,  384. 
waived   on   substantial   performance,   378. 

FRANCHISE  AND  CONTRACT  RIGHTS  ENFORCED, 

action  by  the  people,  587,  590,  594,  600. 

legal  proceedings,  587,  588,  597,  598. 

legislative   enactments,   587,   589,   593. 

public  utility  commissions,  587,  591-597,  600,  601. 

FRANCHISE  AND  PROPERTY  RIGHTS, 

distinguished,   368,  371,   379,  380,   382-386,  388. 

FRANCHISE    CONTRACTS, 

competitive  franchises  distinguished,  134,  146,  157,  164. 

FRANCHISE   RIGHTS, 

municipal  corporations  duty  to  enforce,  500,  501,  510,  518,  521- 

523. 
strict  enforcement  necessary,  586-601. 

FRANCHISES, 

acceptance  and  installment  of  plant,  108. 

co-extensive  with  city  limits,  103. 

consent  of  municipality  to  use  of  streets,  389-393,  404-406,  408. 

constitutional  protection   against  impairment,   115. 

contracts,   87,   88,  92,  93,  95-97,  107,   112,  133-135,   137,  140,  142. 

contracts  protected  by  equity,  107,  133,  134. 


INDEX.  917 

[References  are  to  Sections.] 

FRANCHISES— Continued. 

classified.  87,  88,   106. 

defined,  87,  88,   106. 

duration,  120. 

duration   fixed   by  municipality,   90. 

duty  of  municipality  in  granting,  105. 

duty  of  municipal  public  utility  not  to  discriminate,  210-213, 
215,   222-225,   227. 

enforced  by  municipal  franchise  bureau,  600,  601. 

enforcement  of   rights   essential   for   adequate   service,   page   7. 

granted  only  for  public  convenience,  604,  608,  609,  610. 

indeterminate,  defined  and  discussed,  page  11. 

indeterminate,   exclusive   and   properly   regulated,   page   11. 

limitation  on  sale  as  property,  361,  362. 

limited  to  life  of  grantor,  103. 

municipal  commissions  or  bureaus  business  necessity,  pages  7- 
10. 

municipal  corporations  duty  to  enforce,  500,  501,  510,  518,  521- 
523. 

municipal   grant   public   and  governmental,   109,   110. 

municipal   public   utilities   and   public   welfare,   page   5. 

not   exclusive   by   implication,   104. 

not  exclusive  under  implied  power  or  by  implication,   page  5. 

not  perpetual  by  implication,  168,  169,  170,  172,  175-182,  184,  185. 

options  of  municipality  to  purchase,  358,  359,  360,  362. 

police  power  a  limitation,  102,  lOS. 

power  of  municipality  liberally   construed,  428,  430,   431. 

property  of  municipal  public  utilities  on  expiration  or  for- 
feiture, 368-388. 

public  welfare,  page  5. 

rate  regulation  of  municipality,  page  6. 

reasonable  regulations  limited  by  provisions,  530,  535,  536,  539, 
543-545. 

revocable    before   acceptance    or   operation,   108. 

rights  available  to  inhabitants,  95-98,  100,  109,  116,  190-207. 

sale  to  highest  bidder,  105,  138. 

special    and   general   distinguished,   379. 

special  rights  of  municipal  public  utilities  to  uso  of  streets, 
88,  89,  91,  92,  93. 

special  rights  to  be  a  body  corporate,  87. 

strictly  construed  against  grantee,  104,  132,  133,  i;56,  137,  139. 
140. 

FRANCHISES   OF   MUNICIPAL    CORPORATIONS, 
limited  to  easement  of  municipality,  185. 


9l8  INDEX. 


[References  are  to  Sections.'] 

FRANCHISES   OF  MUNICIPAL   CORPORATIONS— C7o»<iw*6d. 
limited  to  life  of  grantee,  178,  180. 
limited  to  life  of  grantor,  177. 
municipal   public   utilities   in   streets,    389-413. 
not   exclusive  under   implied   power,  405,  409. 
not  perpetual  under  implied  power,  409. 
optional   if  duration  not  fixed,   182. 
streets,   389-413. 
void  if  excessive,  183,  184,  187. 

FRANCHISES    OF   MUNICIPAL    PUBLIC    UTILITIES, 
acceptance  and   operation,   375,   376,  377. 
duty  of  municipal  officers,  391-394,  402-404,  409,  410,  413. 
power  of  state  to  make  perpetual,  167,  174,  175,  188. 

FRANCHISES  OF  WATER- WORKS, 

municipal  corporations  recovery  for  fire  loss,  235,  243,  253,  254, 
255,  259,  263. 

FRAUD, 

contract  of  municipality,  14. 

FRAUD  OR  ABUSE  OF  POWER, 

limitation  of  municipal  officers,  12,  13. 
limitation  of  municipality,  11. 
limitation  of  municipality  fixing  rates,  498. 
limitation  of  municipality  to  contract  for  service,  144,  147,  148, 
162,  163. 

FUNCTIONAL  DEPRECIATION, 

defined  and  discussed,  456,  460,  466-470. 

G 
GAS  WORKS, 

contract  of  municipality,  5,  9,  11. 

municipal   ownership,  7. 

sale  on  failure  of  supply,  358,  359. 

GENERAL    WELFARE, 

"indeterminate   franchise,"   608-610,   612. 
municipal  contract  for  electric  light,  21. 
municipal  contract  for  water  supply,  20. 
municipal   corporations,    18. 
municipal  electric  light  plant,  28. 

municipal  gas,   electric   light  or  water-works  system,  25. 
municipal  natural   gas  plant,  26. 

municipal   ownership  and   control,   149,   150,   153,  164,   165,   166, 
574-585. 


INDEX.  919 

[References  are  to  .Vec<ioas.] 

GENERAL   WELFARE— C'o/iMHix«d, 

municipal  public   utilities,  29,  30,  31,   32,  35. 

municipal  rapid  transit  system,  23,  25. 

municipal  regulation   limited  to  municipality,   112. 

municipal  water  and  lighting  plants,  41,  42,  43,  44. 

police  power,  93. 

power  of  municipality,  35,  36,  38. 

rate   regulation   continuous,   505,   506,   513-518,  522,   523. 

streets,  390,  393.  395,  398,  402,  403,  406,  410. 

GOING  CONCERN, 

rates,  462,  471,  472,  473,  474. 

reproduction  theory  ignores,  473,  474. 

original  and  reproduction  cost  fails  to  cover,  478,  479,  487. 

GOVERNMENT  OF  MUNICIPAL  CORPORATIONS, 

organization  to  preserve  order,  page  1. 

GOVERNMENTAL  AGENCIES, 

positive  action  In  interest  of  public  welfare,  pages  2,  3. 

GOVERNMENTAL   DUTY   OF   MUNICIPALITY, 

water-works   service   for   fire   protection,   234,   249,   253-255,   259. 

GOVERNMENTAL     LEGISLATIVE      POWERS     OF     MUNICIPAL 
CORPORATIONS, 
rate  regulation  continuous,  49S,  506,  514,  516,  517,  518. 

GOVERNMENTAL   POWERS, 
authority   of  state,   3. 
available  at  all  times,  12. 
can  not  be  abridged,  3. 
contract  of  municipality,  3. 

liability  for  negligence,  3,  264.  265,  266,  26S,  273,  274. 
liability  in  contract,  3. 
liability  of  municipal  corporations,  4. 
limitation,  5. 

municipal   corporations,   page   3,   §   3. 
street  franchise,  90. 

GOVERNMENTAL  REGULATION  AND  CONTROL, 

municipal   public   utilities,   57. 

GRANTS, 

franchises  or  charters,  87,  88,  89.  90,  95. 

GUARANTEED   INVESTMENT, 

municipal  public  utilities,  443.  444.  4'">.  4=^4 


920  INDEX. 

[References  are  to  Sections.] 

H 

"HOME   RULE"   FOR   MUNICIPAL   CORPORATIONS, 
constitutional   provisions,   page   9,   §   600. 
constitutional  provisions  and  statutory  grants,   64. 
modern   tendency,   page   9. 
municipal  public  utilities,  page  9,   §  600,  601. 
rate  regulation  of  municipality,  508,  509. 


ICE  AND  WATER- WORKS, 

contract  of  municipality,   13. 
power  of  municipality,  48. 

IMPLIED  POWERS, 

municipal  corporations,  12,  30. 

IMPLIED  POWERS  OP  MUNICIPAL  CORPORATIONS, 
can  not  alienate  or  obstruct  streets,  406. 
construction  by  courts,  pages  4,  29. 
electric  light  plant,  39,  44. 

franchise  not  exclusive  by  implication,  132,  136,  137,  139,  140. 
franchise  not  perpetual,   128. 
ice  and  water-works,  48. 

increase  of  sphere  of  municipal  activity,  page  4. 
limitation  of  statutory  provisions  and  necessity,  29. 
municipal  public  utilities,  29. 

municipal  purpose,   police  power  and  general  welfare,  35,   36. 
no  exclusive  franchises,  117,  118,  121-125. 
perpetual  franchises  of  municipal  public  utilities,  168-170,  172, 

175-182,  184,  185. 
public  necessity  and  convenience,  42,  44. 
public   supply   of   electric   light,   the   limitation,   49-54. 
water-works,    45. 

IMPROVIDENCE    OF   MUNICIPAL    CORPORATIONS, 
constitutional   limitation,   66,   68. 

INADEQUATE   SUPPLY   OF   SERVICE, 
discrimination   not  justifiable,   224,   225. 

INCREASE    OF   SPHERE    OF   MUNICIPAL    ACTIVITY, 
attitude  of  courts,  578-585. 

attitude  of  courts  favorable  for  public  welfare,  page  4. 
constitutional  provisions,  page  2. 
implied  power,  page  4. 
marked  characteristic  of  modem  civilization,  page  1. 


INDEX.  921 

[References  are  to  Hcctiona.] 

INCREASE  OF  SPHERE  OF  MUNICIPAL  ACTIVITIES— €onttn««d. 
municipal  ownership  of  municipal  public  utilities,  page  2. 
municipal  regulation  and  control,  page  2. 
regulation  of  rates  and  service,  508,  509. 
solution  of  municipal   problems,  pages   1,  2. 

INCREASING  COST  OF  SERVICE, 
telephones,  569,  570. 

"INDETERMINATE   FRANCHISE," 
defined  and  discussed,  page  11. 
exclusive  and  duration  indefinite,  604,  608,  609. 
exclusive  privilege  under  proper  regulation,  page  11. 
legalized   monopoly,   page   11,   §§   604,   60S,   609. 
limited  by  public  convenience,  page  11. 

INHABITANTS   OF  MUNICIPAL,  CORPORATIONS, 
activity  unrestricted   by  municipality,  page  1. 
beneficiaries  municipal  public  utilities,  348,  349,  350,  351,  352. 
beneficiaries  of  municipal  franchises,  191-196,  199,  201,  205. 
beneficiaries   rate   regulations,   422,   429. 
discrimination  in  service  of  municipal  public  utilities,  208-222, 

224-229. 
enforcement  of  discrimination  by  Impracticable,  211. 
enforcement   of    rights    necessary    to   secure    adequate    service, 

pages  6-12. 
franchise  rights  available,  95-98,  100,  106,  109,  116,  190-207. 
Increase  of  sphere  of  municipal  activity,  page  4. 
municipal  public  utilities,  pages  1,  8,  9,  12. 
positive   action   of   municipality,   page   2. 
rates  of  municipal  public  utilities.  449,  465. 
real    party   in    interest   for   water-works   service,   230  233,    237- 

241,    243-248. 
repressive  activity  of  municipality,  page  2. 
right  of  access,  light  and  air,  524,  526. 
right  to  municipal  public   utility  service  limited,   544. 

INJUNCTION, 

franchise   rights   protected.    107,   110. 

INSURER, 

water-works  company  not  liable,  242.  249. 

INVENTION  OR  IMPROVED  METHODS. 

depreciation   or  obsolescence.   460,  467,  468. 

INVESTMENT, 

coinciding   with  capitalization,   page  12. 
protection  of  state  control  of  capitalization,  605. 


922  INDEX. 

[References  are  to  Sections.} 

INVESTMENT— Con<t?med. 

required  by  franchise  and  contract,  587. 
system  of  accounting  to  determine,  587. 
theories  defined  and  discussed,  477-480,  484-491,  493-496, 

INVESTMENT    OF   MUNICIPAL    PUBLIC   UTILITIES, 
basis  of  reasonable  rates,  456-458,  461-463,  471-474. 
competition,  456,  458,  461,  464,  471-473. 
element  of  risk,  443,  454,  456,  458,  461,  464,  465,  471-473. 
extent  and  permanency,  382,  383,  385,  388. 
monopoly,  456,  458,  461,  464,  471-473. 
not  guaranteed,  443,  444,  453,  454. 
valuation,   475-496. 
valuation  must  be  fair,  456-458,  461-465,  471-474. 

K 

KEY  TO  REGULATION  OF  MUNICIPAL  PUBLIC  UTILITIES, 
streets,  389-394,  398,  404,  407,  408. 

L 

LEASE, 

municipal  public  utility  property,  366. 

LEGAL    PROCEEDINGS, 

enforcement  of  franchise  expensive  and  delayed,  588,  597,  598. 
franchise  and  contract  rights  enforced,  587,   588,  597,  598. 

LEGISLATIVE    ENACTMENTS, 

enforcement  of  franchises  generally  tardy  and  infrequent,  589, 

590. 
franchise   and    contract   rights   enforced,   587,    589,    593. 

LEGISLATIVE  GOVERNMENTAL  POWER  OF  MUNICIPAL  COR- 
PORATIONS, 
control  of  streets  continuous,  394-397,  402,  406,  409-413. 

LEGISLATIVE  NOT  JUDICIAL  QUESTION, 
municipal  ownership,  580. 

LEGISLATIVE  POWERS, 

limitation  of  municipality,  6. 

LIMITATION, 

legislative  powers  of  municipality,  4. 

LOCAL  GOVERNMENT, 
See  "Home  Rule." 
administration  by  municipality,   7. 


INDEX.  923 

[References  are  to  Sectiong.] 


LOCAL  SELF  GOVERNMENT, 
municipal  corporations,  13,  64. 


MAINTENANCE    AND    OPERATION    EXPENSE, 
required   by   franchise  and   contract,   587. 

MARKET  VALUE, 

municipal  public  utility  property,  476-480,  482,  484-487,  489-494. 

MEMORIAL  MONUMENT, 
municipal  purpose,  24. 

METERS, 

cost  of  service  covered,  452. 

how  furnished,  528-535,  539. 

municipal  ownership,  528-530,  534,  535. 

prevent  extravagance  and  measure  service,  528,  531,  535,  639. 

METHODS     OF     ENFORCING     FRANCHISE     AND     CONTRACT 
RIGHTS, 
action  by  the  people,  587,  590,  594,  600. 
defined,  587. 

legal  proceedings,  587,  588,  597,  598. 
legislative  enactments,  587,  589,  593. 
public  utility  commissions,  587,  591-597,  600,  601. 

MODERN   CIVILIZATION, 

increase  of  sphere  of  municipal  activity,  page  1. 

MONOPOLIES, 

constitutional   provisions  prohibiting,  115,  124,   129,   130. 

contract  creating  void,   159,   161. 

"indeterminate   franchise."   legalizes,   604,   608,   609. 

"indeterminate  franchise"  properly  regulated,  604,  608,  609. 

legalized  under  "indeterminate  franchise,"  page  11. 

municipal  public  utilities,  209,  210,  212,  217,  416,  430,  433.  434, 

485.  500,  510,  523. 
municipal   public  utilities  combining.  363.   364.   365. 
municipal   public  utility   franchises.   132.   134,  135.   138,   140. 
rates   of  municipal   public  utilities,   456,  45S,   461,   464,  471-473. 

MUNICIPAL  AND  PRIVATE  OWNERSHIP, 

compared  and  contrasted;  page  6,  §§  576-579,  581-5S5. 

MUNICIPAL    CHARTERS, 
construction,  page  6. 
construed  liberally.  10,  12,  13.  64. 
power  expressed   and   Implied,   10. 


924  INDEX. 

[References  are  to  Sections.} 

MUNICIPAL   COMMISSIONS  OR  BUREAUS, 

available  only  to  large  municipalities,  page  10. 

composed    of   experts   acting   for   municipality,    600,   601. 

duty  to  investigate  and  enforce  franchise  rights,   600,   601. 

inadequate   for   interurban   municipal   public  utilities,   page   10. 

municipal  public  utilities,  586-601,  602,  612. 

practical  business  necessity  of  municipality,  pages  7-10, 

supplemented  by  state,  pages  10,  11. 

MUNICIPAL  CONTROL  OF  STREETS, 

legislative,  governmental  and  continuous,  394-397,  406,  409-413. 

MUNICIPAL  CORPORATIONS, 

administration   of   local   government,   7. 

agent  of  the  state,  2,  5,  7,  88,  90,  96,  97,  101,  127,  128,  134,  135, 

190,   193,   265,   270,    275,    335,    390-392,    398-400,    402,    439-441, 

481,   573-575. 
action  for  public  welfare  must  be  positive,  page  2. 
activity   of   inhabitants   unrestricted,   page   1. 
care  of  streets,  9. 
classification  of  powers,  2,  7. 

constitutional  provisions  for  power  of  regulation,  page  2. 
construction  of  municipal  charters,  page  6,  §§  10,  12,  64. 
construction   of   powers,    17. 

contract  fixing  rates,  499,  500,  503-506,  508,  510-512,  515-523. 
contract  for  bridge,  22. 
contract  for  coal  and  wood,  61. 
contract  for   coliseum,   64. 
contract  for  gas  or  electricity,  25. 
contract   for   electric   light  plant,   21. 
contract  for  excess  electric  power,  15. 
contract  for  excess  water  supply,  13,  15. 
contract  for  gas  works,  9,  11, 
contract  for  ice.  13. 
contract  for  lease  or  sale,  58,  62. 
contract  for  making  bricks,  60. 
contract  for  memorial  monument,  24. 
contract  for  municipal  purposes,  14. 
contract  for  opera  house,  59. 
contract  for  plumbing,  63. 

contract  for  private   manufacturing  enterprise,   62. 
contract  for  public  entertainment,  14. 
contract  for  rapid  transit  system,  13,  23,  25. 
contract  for  service  of  municipal  public  utilities,  9,  65,  66,  68, 

332,  340-345. 
contract  for  water  supply,  5,  9,  11,  13,  20. 


INDEX. 


[References  are  to  Sections.] 


925 


MUNICIPAL  CORPORATIONS— (7onttntt€d. 

contract   for   wharves.  28. 

contract  to  remove  water  from  boat,  15. 

contract  to  sell  surplus  water  supply,  100. 

control  of  capitalization   of  municipal   public  utilities,  481-483. 

control  of  service  and  equipment  of  municipal  public  utilities, 

525-530,  532,   534-539. 
control  of  streets  delegated  by  state,  392,  394,  398-406,  409,  410, 

412,  413. 
control  of  streets  for  public,  524,  526,  527,  541,  542. 
convention  hall,  27. 
discrimination  in  service  of  municipal  public  utilities,  210-213, 

215,   222-225,   227. 
duration  of  contract  for  service,  144,  148,  150-155,  162,  163,  166. 
duty  in  granting  municipal  franchises,  105. 
duty  to  enforce  franchise  rights,  500,  501,  510,  518,  521-523. 
duty   to  provide   municipal   public   utilities,   38. 
duty  to  purchase  plant  or  renew   franchise,  388. 
duty  to   regulate  rates   and   service,   499-501,   505,   506,   508-510, 

513,    514,    518,   520-522. 
electric   light   plant,   2s;,   3';,   39. 

electric  light  plant  for  public  purpose   only,  49-54. 
enforcement    of    rights    necessary    to    secure   adequate    service, 

pages  6-12. 
estoppel,  14. 

exclusive  franchise  limited  to  necessity,  131. 
franchise   rights   follow   limits   of   municipality,   103. 
exemption   from   taxation   of  governmental   property,   319,   320. 
exemption  of  municipal  public  utility  property  from  taxation, 

316,   319.   321-345. 
fixing  rates  legislative  and  administrative,  440-442.  445,  44S. 
granting   franchises   must   be   reasonable,    111-114. 
grant  of  franchises  discretionary,  127. 
governmental   powers,  4,   5. 
"home  rule"  in  rate  regulation,  508,  509. 
"home  rule"   modern   tendency,   page   9. 
"home    rule"    under    constitutional    provisions    and    statutory 

grants,  64. 
ice  and   water-works,   48. 

Implied  power  by  construction  of  courts,  page  4,   jj  29,  30. 
implied  powers  classified  and  defined.  35.  36. 
Implied  power  to  purchase  but  not  to  alienate  property,  pa^  6. 
Include  municipal   public   utilltios   of  annexed   territory.   103. 
legislative  powers.  6. 
liability    for   water-works.   267.   271.   272.    275.    276. 


926  INDEX. 


[References  are  to  Sections.] 

MUNICIPAL  CORPORATIONS— Continued. 

limitation  of  liability  for  negligence,  264-266,  268,  273,  274. 

limitation  of  power,  11. 

local  self  government,  13,  64. 

municipal  commissions  or  bureaus  business  necessity,  pages  7-10. 

municipal  indebtedness  a  constitutional   limitation,  65,  66. 

municipal  ownership,   346-348,   350,   352,   355,   356,   359-361,  572- 

585. 
municipal   ownership   constitutional,   page  4. 
municipal  public  utilities,  30,  31,  36-38,  69-86,  590-597,  600-602. 
municipal  public  utilities  and  party  politics  divorced,  pages,  8, 

9. 
municipal   public   utility   regulations,   524-545. 
municipal  purposes,  18,  65. 
municipal  water  and  lighting  plant,  41,  42. 
natural  gas  plant,  26. 
negligence,    265-272,   275,    276. 
negligence  of  officers,  9. 

not  excluded  by  implication,   136,   145,   146,   164. 
organization   to  preserve   order,  page   1. 
police  power,  395,  398,  410-413. 
power  to   contract   and   regulate   rates   distinguished,   435,   436, 

437. 
power  to   contract  for   public  utility   service,   144-151,   153-155, 

162-166. 
power  to  contract  for  service  limited  to  necessity,  148,  150-156, 

162,   163. 
power  to  contract  with  individuals,  4. 
power  to  grant  exclusive  franchise  strictly  construed,  123-125, 

127,  128. 
power   to   grant   perpetual   franchises   by   implication,    168-172, 

174-182,   184-189. 
power  to  provide  municipal  public  utilities,  45-55,  57. 
power  to  regulate  and  fix  rates  by  contract  distinguished,  503- 

505,  510-522. 
powers  defined,  29. 

powers  delegated  by  state,  117,  118,  119. 
powers  express  and  implied,  1. 

powers  liberally  construed  for  public  welfare,  page  4. 
powers  limited  by  constitution,  17. 

powers   limited   to   public   or   municipal   purposes,   55-63. 
private  or  proprietary  powers,  2,  5,  6,  7,  9,  11,  13. 
private  proprietary  powers  for  public  welfare,  page  5. 
problems  increasing  in  complexity  and   importance,   page  1. 
public  health  and  control  of  streets,  395-397,  411,  413. 


INDEX. 


[Kefercncea  are  to  Sections.] 


927 


MUNICIPAL  CORPORATIONS— Confiniied. 

public  or  governmental  powers,  2,  7,  574,  575. 

public  purposes,  13. 

rapid  transit  system,  43,  582-585. 

rate   regulation   by  contract,   420-438. 

rate  regulation  of  municipal  public  utilities,  198.  199,  202,  206, 

206,  418-438. 
regulation  of  municipal  public  utilities,  498-523. 
repressive  activity  of  municipality,  page  2. 
sale  or  alienation  of  property,  page  5. 
sewer  system,  40. 
source  of  powers,  1. 

special  franchise  rights  over  streets,  88,  89,  90. 
statutory  powers,  1. 
statutory  powers  to  contract  for  service,  145,  146,  150-154,  157, 

162,  163. 
streets,  61. 

steam  railroad  an  exception,  34. 
streets  for  transportation  and  communication,  541. 
taxation  and  municipal  ownership,  316,  331. 
taxation  of  property,  page  5. 
trustee  for  public  of  streets,  402,  403. 
two  capacities,  7,  8,  9. 

unparalleled  growth  in  modern  times,  page  1. 
water-works  service  governmental  duty,  234,  249,  253-255.  259. 

MUNICIPAL  FERRY, 

municipal  purposes,  25. 

MUNICIPAL  FIRE  DEPARTMENT, 
municipal  public  utilities,  524-526. 

MUNICIPAL  FRANCHISES. 

conditional  grants  strictly  construed.  126. 

not  exclusive  under  implied  power,  117-119,  121-123. 

not  perpetual  under  implied  powers.  128. 

powers  of  municipality  strictly  construed.  123-125,  127.  128. 

MUNICIPAL   INDEBTEDNESS. 

attempts   to   evade  constitutional   limitation.   67. 

constitutional   limitation.  65.  66. 

constitutional   limitation  defined.  66,  68. 

limitation  of  necessity.  68. 

municipal  public  utilities,  69-86. 

municipal  public  utility  service  and  plant  distinguished,  69. 

serial  contracts  for  municipal  r'l^Hc  utility  service,  83-86. 


928  INDEX. 

[References  are  to  Sections.] 

MUNICIPAL  OFFICERS, 
discretionary  powers,  12. 
granting  or  revoking  franchise  rights,  110. 
municipal  public  utilities,  pages  7,  8,  9. 
power  to  fix  rates,  425. 
power  to  regulate  rates,  509,  513. 
trustees  for  public,  3. 

MUNICIPAL  OWNERSHIP, 

adequate  regulation  and  control  only  alternative,  page  4. 
adequate  service  at  reasonable  rates,  576-579,  581. 
alternative  to  adequate  regulation  and  control,  572,  576-579. 
attitude  of  courts,   75,  346-348,  350,  352,  355,   356,  359-361,  449, 

578-585. 
attitude  of  courts  favorable  for  public  welfare,  page  6. 
attitude  of  courts  on  tax  exemption,  316,  331. 
constitutional,  574-576,  578,  580-585. 
constitutional  provisions,  page  4. 
eminent  domain,  573-575. 

exemption  from  taxation  of  municipal  public  utilities,  316,  331. 
gas  works,  7. 
general  welfare,  574-585. 

increase  of  sphere  of  municipal  activity,  page  2. 
legislative  not  judicial  question,  580. 

legislative  or  administrative  not  judicial  question,  page  6. 
liability  of  municipality  for  negligence,  264-272,  275,  276. 
meters  furnished  by  customer,  528-530,  534,  535. 
municipal  corporations,  572-585. 
municipal  public  utilities,  17,  57,  119,  121,  572-585. 
police  power  regulation  an  alternative,  611. 
power  of  municipality  constitutional,  page  4. 
public  interests,   578,  579,   581-585. 
public  purposes,  573,  574,  575. 
rapid  transit  system,  7,  582-585. 
rates,  575-579. 

rates  compared  with  private  ownership,  449. 
sale   of  property  providing  municipal   public  utilities,   346-348, 

352,  355,  356,  359-361. 
service  pipes  furnished  by  customer,  528,  529,  530,  538,  540. 
taxation  and  sale  of  municipal  public  utilities,  page  3. 

MUNICIPAL  PUBLIC  UTILITIES, 
a  business  concern,  9. 
abutting  property  owners,  203,  204. 
acceptance  of  franchise  necessary,  375,  376,  377. 
acceptance  of  municipal  consent  contract,  431,  432,  436,  437. 


INDEX. 


[References  are  to  Sections.] 


929 


MUNICIPAL   PUBLIC   UTILITIES— Continued. 

adequate  service  at  uniform  rates  under  public  utility  com- 
mission, 608-610,  612. 

affected  with  public  interest,  94,  191-196,  199,  201. 

attitude  of  courts,   19. 

business  commercial,  not  political  matter,  pages  8,  9. 

capitalization  and  expenditures  controlled  by  state,  605. 

capitalization   and   investment  coinciding,   page   12. 

competing  telephone   systems   inadequate,   546-549,   557,  568. 

competing  trespasser  e.xcluded,   143. 

competition  supplanted  by  public  utility  commission,  pages  10, 
11. 

competition    supplanted    by   state    regulation,   603-610,   612. 

complexity   and   difficulty   of   control,    607-610,    612. 

consent  of  municipality,  524-527,  536,  537,  540-542,  545. 

consent  of  municipality  to  use  of  streets,  389-393,  404,  405,  406, 
408. 

constitutional,  32. 

contract  fixing  rates,  420-438. 

contract  of  municipality,  5,  9. 

control  of  competition,  118,  119,  121,  122. 

control   of  municipal   ownership,   572-5S5. 

decisions   defining  the   law,  page   12. 

decisions  recent  and  frequently  conflicting,  page  12. 

discrimination  in  service,  208-229,  544. 

distribution   of  cost.   67. 

doctrine  of  increasing  cost  of  telephone  service,  569,  570. 

duty   to   furnish    service,   190-202,   205,   206. 

duty  to  serve  inhabitants  of  municipality,  544. 

duty  to  serve  public  personal,  348,  349,  351,  352,  354,  362,  363. 

economy  of  supplying  public  and  private  service,  45,  46,  47, 
48.  57. 

elements  constituting  reasonable   rates,  456-474. 

enforcement    of    rights    of    municipality,    pages    6-12. 

equipment   concentrated,    525-527. 

exemption  of  municipal  property  from  taxation,  316,  319,  321- 
345. 

fixing  rates  legislative  and  administrative,  440-442.  445,  448. 

franchise  rights  co-extenslve  with  municipality,  103. 

franchise  rights  to  use  of  streets.  88.  89,  90. 

governmental   regulation   and  control.  57. 

"home  rule"  for  municipality,  page  9.  {$  600.  601. 

how   rates  are  fixed.  439-442.   449-451. 

implied  powers  of  alienation  to  municipality,  page  6. 

implied   powers  of  municipality,  29. 

59— Pub.  Ut. 


930  INDEX.  , 

[References  are  to  Sections.} 

MUNICIPAL   PUBLIC   VTIhlTIES— Continued. 

inhabitants  of  municipality  entitled  to  service,  93,   95-98,  100, 

105,  109,  190-207. 
installation   of   equipment,    524-545. 
investment  not  guaranteed,  443,  444,  453,  454. 
key  to  regulation  in  control  of  streets,  389-394,  398,  404,  407, 

408. 
largest  return  on  investment,  576-578,  579,  581. 
liability  for  failure  to  furnish  service,  207. 
liability  of  municipality  for  negligence,  264-272,  275,  276. 
meters,  528-535,  539. 
monopolies,  485. 

monopoly  agreements  invalid,   363,  364,  365. 
municipal  and  private  ownership  compared,  page  6. 
municipal  and  private  ownership  contrasted,  119,  120,  149,  150, 

153,  164-166,  346,  350,  351,  355,  356,  358-360. 
municipal  bureaus  or  commissions,  586-601,  602,  612. 
municipal    commissions    or    bureaus    business    necessity,    pages 

7-10. 
municipal  control  of  equipment,  524-545. 
municipal  corporations,  590-597,  600,  601,  602. 
municipal  franchises  for  public  welfare,  page  5. 
municipal  franchises  strictly  construed,  132,  133,  136,  137,  139, 

140. 
municipal  indebtedness,  69-86. 
municipal  ownership,  572-585. 
municipal  ownership  and  control,  57. 

municipal  ownership  and  exemption  from  taxation,  316,  331. 
municipal  purposes,  16,  17,  18,  19,  32,  65. 
municipal   regulation   and   control,   191-196,   199,   201,   485,   572, 

576,  577,  581,  582. 
natural   monopolies,  page  5,   §§  57,   92,  209,  210,  212,  416,  430, 

433,  434,  500,  510,  523,  547,  548,  560. 
necessity  for  exclusive  franchise,  131. 
negligence,  264-276. 
non-residents'  rights  to  service,  100. 
party  politics,  pages  8,  9. 
payment  by  option,  80,  81. 
payment  by  "special  assessments,"  78,  79. 
payment  from  own  revenue,  75,  76,  77,  82. 
payment  in  future,  70-73,  75,  76,  82,  83,  85. 
payment  of  encumbrances,  70,  73,  78,  79. 
payment  out  of  special  fund,  74-79,  83,  85. 
payments  by  installments,  70,  82-86. 


INDEX. 


[References  are  to  Sections.] 


931 


MUNICIPAL    PUBLIC    UTILITIES— Continued. 

physical  connection  of  telephone  plants,  546,  551,  553,  554,  557- 

562,   565-568. 
police  power  of  municipality.  524-527,  529,  542,  545. 
power  of  municipality,  page  3,  §§  30,  36-38,  65,  66. 
power  to  fix  rates,  419,  451. 
public  health  and  convenience,  36,  37. 
public  purposes,  348-352,  355,  358,  359,  360. 
public  regulation  and  control  for  monopolies,  pages  5,  6. 
public  trust,   348-352. 
public  utility  commissions,  pages  7-12. 
rate  regulation  alternative  to  ownership,  page  4. 
rate  regulation  by  municipality,  418-438. 
rates,  210,  212,  213,  215,  218,  219,  221-223,  225-229,  416-438,  572. 

576. 
rates  must  be  reasonable,  439,  441,  442,  444.  446,  454. 
rates  presumed  reasonable,  442.  446.  447,  449.  450. 
reasonable  rates  defined   and   discussed,   455-474. 
reasonableness  of  rates  a  judicial  question,  442,  444-451. 
regulation  and  control  by  public  utility  commissions,  pages  7- 

12,   §§  572,   576,  579,  602-612. 
regulation  and  control  of  public,  94. 

regulation  by  commission  instead  of  competition,  pages  10,  11. 
regulation   by  munidlpality,   498-523. 
regulation   for  telephone  service,  546-571. 
regulation  inconsistent  with  franchise  void,  206. 
regrulation  of  capitalization,  pages  11,  12. 
regulation  under  police  power,  611. 
rental  charges,  524,  52S-535,  539. 
rental  payments,  70. 
sale  of  property,  346-367. 

sale  to  municipality  without  statutory  authority,  580,  581. 
service  pipes,  528-530,  536-538,  540. 
shade  trees,  203,  204. 
special   assessment.   540. 
state  control,  415-417. 

state  public  utility  commission  necessary,  602,  603,  612. 
statutory  authority  necessary  to  sell  property,  348,  350-354.  361. 

362,   367. 
stocks  and  bonds,  481-483.  485,  488,  493. 
street  franchises,  61,  389-413. 
streets,  389-413. 

strict  enforcement  of  franchise  and  contract  rights,  5S6-WL 
taxation  and  sale  of  property,  page  3. 
telephone  service  peculiar,  546,  549.  555.  556,  560,  567-670. 


932  INDEX. 

[References  are  to  8ections.'\ 

MUNICIPAL   PUBLIC  \]TIL.ITIES— Continued. 
telephone  service  regulations,  546-571. 
trespasser,  374,  385,  386. 
trust  property,   348-352. 
underground  conduits,  525,  526,  545. 
valuation   of  property,   475-496. 

MUNICIPAL    PUBLIC    UTILITIES    ADDITIONAL    SERVITUDES, 
public  purposes,  278-280,  284,  294,  307,  308. 

MUNICIPAL  PUBLIC   UTILITY   EQUIPMENT, 
streets,  524-527,  536,  537,  540-542,  545. 

MUNICIPAL  PUBLIC  UTILITY  FRANCHISES, 

not  perpetual  by  implication,  168-170,  172,  175-182,  184,  185. 

MUNICIPAL  PUBLIC  UTILITY  PLANTS, 
additional  servitudes,  277,  279-315. 
eminent  domain,  277,  300. 

sale  on  failure  of  service  supply,  356,  358,  359. 
sale  to  municipality  and  private  parties   contrasted,   121. 

MUNICIPAL  PUBLIC  UTILITY  SERVICE, 

contract  of  municipality,   144-151,   153-155,   162-165. 

defined,  198-202,  205,  206. 

limitation  of  liability  for  negligence,  264,  265,  266,  268,  273,  274. 

payable  out  of  current  revenue,  68,  69,  75,  83,  84,  86. 

rates,  152,  153,  158,  162. 

rates,  198,  199,  201,  202,  205,  206. 

value  the  test  of  reasonableness  of  rates,  444,  451,  453,  454,  465- 

MUNICIPAL  PURPOSES, 
Brooklyn  bridge,  22. 
coliseum,  64. 

constitutional  provisions,  582,  583,  584,  585. 
contract  of  municipality,  14. 
convention  hall,  27. 
definition,  16,  18. 

electric  light  plant,  21,  28,  33,  44,  49-54. 
limitation  of  municipal  power,  55-63. 
municipal  ferry,  25. 
municipal  ownership,  582-585. 
municipal  public  utilities,  19,  32,  65. 
municipal  water  and  lighting  plant,  41,  42. 
municipal  water-works,  45. 
natural  gas  plant,  26. 
power  of  municipality,  35,  36,  38. 
public  baths,  41. 


INDEX.  933 

[References  are  to  8eotion».] 

MUNICIPAL,  PURPOSES— Conttntted. 
public  memorial,  24. 

rapid  transit  system,  23,  25,  43,  582-585. 
steam  railroad  an  exception,  34. 
taxation,  65. 
water-works,  20. 
wharves,  28. 

MUNICIPAL   REGULATION   AND   CONTROL, 

alternative  for  municipal  ownership  if  adequate,  page  4. 
competition   of  municipal  public  utilities,  page  5. 
discrimination  in  service  of  municipal  public  utilities,  210-213, 

215,  222-225,   227. 
efficient  methods  available  to  municipality,  page  3. 
eminent  domain,  189. 

enforcement  of  rights  of  municipality,  pages  6-12. 
equipment  of  municipal  public  utilities,  524-545. 
franchises  not  perpetual   by   implication,   168-170,   172,   175-182, 

184,  185. 
increase  of  sphere  of  municipal  activity,  page  2. 
limitation  on  sale  of  property  of  municipal  public  utilities,  346- 

348,  355,  356,  359,  360. 
meters,  528-535,  539. 
municipal  and  private  ownership  contrasted,  149,  150,  153,  164- 

166. 
municipal   public   utilities,   89-93,   95-97,   102,   105,   111-113,   118, 

119,   121,   190-196,   199,   201,   485,   572,   576,   577,   581,   582. 
municipal  public  utilities  necessary,  499,  500. 
necessity  the  limitation,  545. 

proper  and  convenient,  499,  500,  506,  508-510,  512,  517-523. 
rates,  152,  153,  158,  162. 
repressive  activity  of  municipality,  page  2. 
service    and   equipment   of   municipal    public    utilities,    525-530, 

532,   534-539. 
street  franchises,  389-413. 

strict  enforcement  of  franchise  and  contract  rights,  586-601. 
taxation  and  sale  of  municipal  public  utilities,  page  3. 
water-works  service,  231,  232.  235,  259. 

MUNICIPAL  WATER  AND  LIGHTING   PLANT, 
municipal   purpose,   41,   42,   44. 

MUNICIPAL   WHARVES, 
municipal  purpose,  28. 

MUNICIPALITY, 

See  MuNicip.\L  CoBroRATiONs. 


934  INDEX. 

[References  are  to  Sections.^ 

N 

NATURAL   GAS   PLANT, 
municipal  purpose.  26. 

NATURAL   MONOPOLIES, 

governmental  regulation  and  control,   57. 
municipal  public  utilities,  57,  92,  547,  548,  560. 

NECESSITY, 

limitation  of  municipal  contracts  for  service,  148,  150-156,  162, 
163. 

NEGLIGENCE, 

liability  of  municipal  public  utilities,  264-276. 
municipal  officers,  9. 

NEGLIGENCE   OP  MUNICIPAL   CORPORATIONS, 
defined  and  limited,  264,  265,  266,  268,  273,  274. 
liability  for  municipal  public  utility  service,  265-272,  275,  276. 
limitation  of  liability,  264,  265,  266,  268,  273,  274. 
streets  and  alleys,  9. 

NEGLIGENCE    OP   WATER- WORKS   COMPANY, 
inhabitants  of  municipality,  235,  237,  238,  264. 

NET  EARNINGS  RULE, 

defined  and  discussed,  495,  496. 

valuation  of  investment,  477,  485,  495,  496. 

NON-RESIDENTS   OP  MUNICIPAL   CORPORATIONS, 

municipal  public  utility  service,  100. 

.,  J, 
NON-USER, 

forfeiture  of  franchise,  372,  373. 


OBSOLESCENCE  OR  PUNCTIONAL  DEPRECIATION, 
defined  and  discussed,  456,  460,  466-470. 
rates,  456,  460,  466-470. 

OPERA  HOUSE, 

contract  of  municipality,  59. 

OPERATION   AND   MAINTENANCE, 

expense  and  rates,  456,  457,  459,  460,  466-471. 

OPTION   OP   MUNICIPAL    CORPORATIONS, 

municipal   public   utilities,   358,   359,    360,    580,   581. 


INDEX.  935 

[References  are  to  Sections.] 

OPTIONAL   PAYMENTS, 

municipal  public  utilities,  80,  81. 

ORIGINAL  COST, 

limitation  of  necessary  capacity,  478. 

valuation   of  investment,   477-479,  490,   493,  494. 

OUTSTANDING   CAPITALIZATION, 

valuation  of  investment,  477,  480-485,  487,  488,  490,  493. 


PARTY   POLITICS   OF   MUNICIPAL   CORPORATIONS, 

municipal   public   utilities   a   business   matter,   pages   8,   S 

PAYMENT  BY   INSTALLMENTS, 

municipal   public   utilities,   70,   82-86. 

PAYMENT  FOR  SERVICE, 

regulations  for  securing,  219,  220. 

PAYMENT   OF   ENCUMBRANCES, 

municipal  public  utilities,  70,  73,  78,  79. 

PAYMENTS  IN  FUTURE, 

municipal  public  utilities,  70-73,  75,  76,  82,  83,  85. 

PERPETUAL    CONTRACT    FOR    MUNICIPAL    PUBLIC    UTILITY 
SERVICE, 
void  as  excessive,  163. 

PERPETUAL    FRANCHISES, 

municipal   corporations,   168,   171,   174-176,   184.   186-189. 
power  of  municipality  to  grant  must  be  express,  16S-170.   172, 

175-182,   184,   185. 
prohibited  by  public  policy,  169.  170,  172,  175,  176-1S2.  184,  186. 

PERPETUAL   FRANCHISES  OF  MUNICIPAL  CORPORATIONS, 

express  authority  necessary,  409. 

PHYSICAL  CONNECTION, 

telephone  plants,  546.  551.  553.  554.  557-562.  565-568. 

PHYSICAL  CONNECTION  OF  TELEPHONE  PLANTS. 

constitutional   provisions   requiring,   551,   554.   557,   558,   665. 

contracts   available   to  all,   551-554.   557.   559-562. 

necessary  requirement  for  complete  service.  546.  551.  553.  664, 

557-562,   565-568. 
statutory   requirements,  554.  558,  565.  567,  568. 


936  INDEX. 

[References  are  to  Sections.] 

PLANT  AND  EQUIPMENT  OF  MUNICIPAL  PUBLIC  UTILITIES, 
additional   servitudes,  277,  279-315. 
eminent  domain,  277,  300. 

PLUMBING, 

contract  of  municipality,  63. 

POLICE  POWER, 

available  in  public  interest,  4. 

constitutional  provisions,  page  2. 

contract  of  municipality,  4. 

defined,  438. 

limitation  of  municipality  in  exercising,  412,  413. 

limitation  of  municipality  in  regulation  of  rates,  435,  438. 

limitation  of  reasonableness,  545. 

municipal  control   of  streets,  90,  91,  93,  97,  108,  113,   114,   395, 

398,   410-413. 
municipal  public  utilities,  524-527,  529,  542,  545. 
positive   action  of  municipality,  page  2. 
power  of  municipality  defined,  35,  36,  38. 
public  health,  115. 
rate  regulation,  518,  611. 

regulation  of  municipal  public  utilities,  611. 
street  franchises,   134. 
surrender  by  municipality,  4. 

POLICE   POWER   OP   MUNICIPAL   CORPORATIONS, 
continuous,   not   contractual,    102,   108,   112-114. 
electric  light  plant,  39,  41,  42,  44. 
rate  regulation,  97,  102,  108,  434-436,  438. 
sewer  system,  40. 

POPULAR   CONTROL, 

enforcement  of  franchises   fails  to  fix  responsibility,   590. 

POSSESSION  OP  MUNICIPAL  PUBLIC  UTILITY  PROPERTY, 
expiration  or  forfeiture  of  franchise,  368-370,  381-384,  386-388. 

POWERS  OF  MUNICIPAL  CORPORATIONS, 
beneficial  to  citizens  unlimited,   11. 
brick  making,  60. 
can  not  alienate  or  obstruct  streets  without  express  authority, 

406. 
classification,  2,  7,  8. 
coal  and  wood,  61. 
coliseum,  64. 

constitutional  limitations,  17. 
constitutional  provisions  for  regulation,  page  2. 


INDEX.  937 

[Keferences  are  to  Hectiona.] 

POWERS   OF   MUNICIPAL   CORPORATIONS -t'onMnu#d. 
construction  of  courts,  page  3,  §  17. 
contract  for  bridges,  22. 

contract   for  cornlort,   health  and   pleasure,    13. 
contract  for  convention  hall,  27. 
contract  for  electric  light  plant,  2.S,  33. 

contract  for  lease  or  ownership  of  rapid  transit  system,  25. 
contract  for  municipal  public  utility  service,  discretionary,  144. 

147,  14S,  150,   151,  1G2.  1G3. 
contract  for  municipal  public  utility  service  limited   to   neces- 
sity. 148,  150-156,  162,  163. 
contract  for  natural  gas  plant,  26. 

contract  for  public  utility  service,   144  151,    153  155.    162-166. 
contract  for  rapid  transit  system,  23, 
contract  for  steam  railroad,  34. 

control   of  capitalization   of  municipal   public   utilities,   4S1-483. 
control  of  streets  for  public,  524,  526,  527,  541,  542. 
control  of  streets  delegated  by  state,  392,  394,  39S-406.  409,  410, 

412,  413. 
control   of  streets   legislative  and  continuous.  89.   90.   93.   95-97, 

110,  122.  124,   129-131,   134.   137. 
defined,  1.  29. 

defined  by  constitution  and  statute.  27. 
delegated  by  state,  pages  3.  4,  §  117. 
determined   by  capacity,   S. 
discretionary   if   private  or  proprietary,    16. 
discrimination  in  service  of  municipal  public  utilities.  210-218. 

215,   222  225.   227. 
duration  of  eontract   for  service.  144,   148.   150.  151-155,   162.  163, 

166. 
electric  light  plant.  21.   44,  49  54. 
eminent  domain.   1S9. 
enforcement    of    rights    necessary    to    secure    adequate    Borvlce. 

page  6-12. 
equipment  of  municipal   public   utilities,   624-545. 
express  and  Implied,  1.  10,  12. 

fixing  rates  in  manner  provided  by  statute.  504,  511-521. 
franchise   grants   strictly    construed.    123-125,    127.    12S. 
franchise  or  contract  right  to  purchase,  572.  573. 
franchises   not    perpetual    by    Implication.    16S  170.    172.    17.1-181. 

1S4,   1S5. 
governmental  rather  than  proprietary,  page  3. 
granting  franchises  is  delegated.  Ill,  112. 
"home    rule"    under    constitutional     provisions    and     statutory 

grants.    64 


938 


[References  are  to  Sections.} 


POWERS   OF   MUNICIPAL   CORPORATIONS— (7ontiTMiC(i. 

implied  and  discretionary,  31. 

implied  by  courts,  page  4,  §  29. 

limitation,   15. 

limitation  of  fraud  on  contract  for  service,  144,  147,  148,  162, 
163. 

limitations  of  public  or  municipal  purposes,  55-63. 

limited  and  defined  by  necessity  and  convenience,  23. 

limited  by  fraud  or  abuse,  11,  14. 

limited  to  its  territory,  407,  408. 

limited  to  municipal  purposes,  18. 

limited  to  public  purposes,  25. 

memorial  monument,  24. 

municipal  indebtedness  a  constitutional   limitation,   65,   66. 

municipal  ownership,  page  3,  §§  572-585. 

municipal  public   utilities,   45-55,   57. 

municipal  public  utilities  and  party  politics,  page  8,  9. 

municipal  public  utilities  for  itself  and  its  Inhabitants,  38,  40, 
43,  44. 

municipal  regulation  and  control,  page  3. 

municipal  water  and  lighting  plant,  41,  42. 

municipal  water-works,  45. 

municipal  wharves,   28. 

obstructions  in  streets,  524-527,  541,  542,  545. 

opera  house,  59. 

organization  to  preserve  order,  page  1. 

perpetual  franchises,  168,  171,   174-176,  184,   186-189. 

plumbing,  63. 

positive  action  in  interest  of  public  welfare,  page  2. 

private  manufacturing  enterprise,  62. 

private  proprietary,  page  3. 

private  proprietary  as  well  as  governmental  for  public  wel- 
fare, page  5. 

private  proprietary  or  commercial,  2,  7,  8. 

public  and  private  supply  under  statutory  authority,  49  53. 

public  or  governmental,  2,  7. 

purchase,  not  alienation  of  municipal  public  utilities,  implied, 
page  6. 

rapid  transit  system,  43,  582-585. 

rate  regulation  and  contracts  distinguished,  433-436. 

rate  regulation   by  contract,  420-438. 

rate  regulation,  contract  and  franchise  rights  distinguished, 
433-436. 

rate  regulation  delegated  by  state  clearly,  418,  424,  439  441, 

rate  regulation  limited  to  terms  of  statute,  433-436,  438. 


INDEX.  939 

[References  are  to  Sections.] 

POWERS   OF   MUNICIPAL   CORPORATION— Continued. 
rate  regulation  personal  and  continuous,  419. 
regulation    of   municipal    public    utilities,   498-523. 
repressive  activity  of  municipality,  page  2. 
revocable  by  state,  401,   402. 
statutory,  1. 
statutory  power  to  contract  for  service,   145,   146,   150-154,  157, 

162,  163. 
street  franchises,  SS-93,  95-97,  99. 
suspending  rate  regulation  strictly  construed,  498,  502-505,  511, 

513-518,  520,   523. 
territorial  limitation,  112. 
to  regulate  and  fix  rates  by  contract  distinguished,  503-505,  510- 

522. 
two  classes,  2. 
water-works,  20. 

POWERS   OF   MUNICIPAL   OFFICERS, 

discretion  limited  by  fraud  or  abuse,  12. 
rate  regulation  509,  513. 

PRESENT  VALUE, 

valuation  of  investment,  476-480,  4S2,  484-487.  489-494. 

PRIVATE   COMMERCIAL   ENTERPRISES, 

control  and  regulation  of  competition,   55-63. 

PRIVATE    MANUFACTURING    ENTERPRISE, 
contract  of  municipality,  to  aid,  62. 

PRIVATE  OR  BUSINESS  POWERS, 
municipal  corporations,  8. 

PRIVATE   PROPRIETARY   AND  GOVERNMENTAL   POWERS, 
public  welfare  of  municipality,  page  5. 

PRIVATE   PROPRIETARY  POWERS, 
construction,  13. 
contract  of  municipality,  5,  6. 
municipal  contract  for  public  utilities,  5. 
municipal  corporations,  page  3. 
municipal  public  utilities.  9,  16. 

PRIVATE   PROPRIETARY  POWERS  OF  MUNICIPAL  CORPORA- 
TIONS, 
limited  by  fraud  or  abuse.  11. 
negligence.  264.  265.  267-272.  275.  276. 
public  welfare,  page  5. 
taxation  of  municipal  property,  333-339. 


940  INDEX. 

[References  are  to  Sections.] 

PRIVATE   PURPOSES, 

contract   of  municipality,   3. 

PRIVILEGES  OF  MUNICIPAL  PUBLIC  UTILITIES, 
street  franchises,  389-413. 

PROBLEMS   OF  MUNICIPAL   CORPORATIONS, 
increase  in  importance  and  complexity,  page  1. 
majority  of  population   affected,   page   1. 
solution  by  extension  of  sphere  of  municipal  activity,  page  1. 

PROPERTY, 

right  to  possession,  381-388. 

PROPERTY  AND  VESTED  INTERESTS, 
rates,  497. 

PROPERTY   DEVOTED   TO   PUBLIC   USE. 
public  regulation  and  control,  414-416. 

PROPERTY  OF  MUNICIPAL  CORPORATIONS, 

sale  or  alienation  when  used  for  commercial  or  governmental 

purposes,  page  5. 
taxable   or   alienable  under   statutory  provisions,   page  5. 
taxation  when  used  for  commercial  or  governmental  purposes, 

page  5. 

PROPERTY  OP  MUNICIPAL  PUBLIC  UTILITIES, 
cost  of  removal,  370,  378,  381-383. 
expiration   of  franchise,   368-371,   380,  383,   385-387. 
expiration  or  forfeiture  of  franchise,  368-388. 
forfeiture  of  franchise,  368,  372,  373,  377,  378,  384. 
public  uses   or  purposes,  414-416. 
right  to  possession,  368-370,  381-384,  386-388. 
sale,  346-367. 

statutory  authority  necessary  to  sell,  348,  350-354,  361,  362,  367. 
taxation  and  sale,  page  3. 
"used  and  useful"  in  rendering  service,  476,  478,  480,  482,  484, 

491-494. 
valuation,  475-496. 

PROPERTY  OWNERS, 

recovery  against  water-works  for  fire  loss,  239,  244,  260,  263. 

PROPRIETARY  POWERS, 
municipal  corporations,  5. 

PUBLIC  AND  PRIVATE  USES   OP  STREET, 

distinguished  as  additional  servitudes,  307,  308,  314. 


INDEX.  941 

[References  are  to  .-icciiona.] 

PUBLIC   BATHS, 

municipal  purpose,  41. 

PUBLIC  BENEFIT, 

indeterminate  franchise,  608-610,  612. 

PUBLIC  CONVENIENCE, 

condition  of  granting  franchise,  604,  608-610. 

limitation  of  granting  '"indeterminate  franchise,"  page  11. 

PUBLIC     GOVERNMENTAL     POWERS     OF  MUNICIPAL     COR- 
PORATIONS, 

exemption  of  property  from  taxation,  319,  320. 

liability   for   negligence,   264-266,   268,   273,  274. 

PUBLIC   HEALTH, 

electric  light  plant,  39,  44. 

municipal  control  of  streets,  395-397,  411,  413. 

municipal  ice  plant  and  water-works,  48. 

municipal  public  utilities,  36,  37,  38. 

municipal  water-works,  20,  45. 

municipal   water-works  exempt  from  taxation,  331. 

police  power,  93,  115. 

power  of  municipality,  13,  36-38. 

sewer  system,  40. 

PUBLIC   IMPROVEMENTS, 
distribution   of  cost.  67. 

PUBLIC  POLICY, 

continuous  control  of  streets  in  municipality,  129,  130,  131,  134, 

138. 
franchises  not  exclusive  by  implication,  132,  136-140. 
franchises  not   perpetual   by   implication,   168-170,   172,   175-182, 
184,  185. 

PUBLIC   POWERS, 

municipal    corporations,    3. 

PUBLIC   PROPERTY   OF  MUNICIPAL   CORPORATIONS, 
municipal   public  utilities,  348,  351,  352,  355-360. 

PUBLIC    PURPOSES, 

municipal  corporations,  13. 
municipal  ownership,  573,  574.  575. 
police  power  rate  regulation.  611. 
streets,  390,  393.  395.  398.  402.  403.  406,  410. 

PUBLIC    PURPOSES    OF    MUNICIPAL    PUBLIC    UTILITIES, 
exemption   from  taxation.   321.   322.   324  327.   331. 


942  INDEX. 

[References  are  to  Sections.] 

PUBLIC  REGULATION  AND  CONTROL, 

property   of   municipal   public   utilities,   414-416. 

takes  place  of  competition,  209-213,  215-218,  221,  222,  225. 

telephone  service  especially  necessary,  546-550. 

PUBLIC    SAFETY, 

contract  for  electric  light,  21. 

PUBLIC  SERVICE, 

municipal  and  private  ownership  compared,  page  6. 
rate  concessions,  223. 

PUBLIC  USES  OR  PURPOSES, 
defined,  414-416. 

municipal  public  utilities,  348-352,  355,  358-360. 
no  additional  servitude,  289,  290,  294,  307,  308,  310,  311. 
property  of  municipal  public  utilities,  414-416,  446,  447,  451,  452. 
streets  and  highways,  278-280,  284,  294,  307,  308. 

PUBLIC  UTILITIES, 

See  MuNiciPAx  Public  Utilities. 

PUBLIC  UTILITY   COMMISSIONS, 

attitude  of  courts  favorable,  606-610,  612. 

capitalization,  pages  11,  12. 

constitutional  and  efficient,  595-598,  600,  601. 

defined  and  discussed,  pages  7-12. 

efficient  and  inexpensive  method  of  regulation,  pages  7-12. 

enforcement  of  franchises  adequate,  summary  and  inexpensive, 

591-597,  600,  601. 
franchise  and  contract  rights  enforced,  587,  591-597,  600,  601. 
municipal  public  utilities,  591-601. 

municipal  public  utilities  divorced  from  politics,  593,  594. 
necessary  for  adequate  service  at  uniform  rates,  pages  7-12. 
party  politics,  pages  8,  9. 

permanent  administrative  body  of  experts,  591-597,  600,  601. 
power   to  fix   rates,   439-442. 
rate  regulation,  503,  511,  596-601. 

regulation  and  control  alternative  to  ownership,  page  4. 
regulation  and  control  of  municipal  public  utilities,  pages  7-12, 

§§  572,  576,  579. 
regulations  to  secure  uniformity  and  adequate  service,  608-610, 

612. 
state  only  sufficiently  adequate,  page  10-12. 
state  or  municipal,  pages  7-12. 
state  supplementing  municipal,  pages  10,  11. 
substitute  for  competition,   pages  10,   11. 
telephone  service  requires  regulation,  550,  567. 


INDEX. 


[References  are  to  iS'ecftorw.] 


943 


PUBLIC   UTILITY   COMMISSIONS   OF   THE    STATE. 

regulation   and    control    of   municipal    public   utilities,    602-^12. 

PUBLIC   WELFARE, 

alienation   of   property   of   municipal   public   utilities,   350,   357, 

358,  359,  360,  363-366. 
concentration   of   municipal   public   utility   equipment,   525. 
conservation  of  property  of  municipal  public  utilities,  382,  383, 

385,   386,   388. 
limitation  of  police  power,  438. 
municipal    franchises,    109,    110,    132,    136-138.    140,    168-170,    172, 

175-181,  184,   185. 
positive  action  of  municipality,  page  2. 
property  on  expiration  or  forfeiture  of  franchise,  369,  370,  380, 

381,  382,  386,  388. 
telephone  service  duplicated,   547,  548,  549. 


QUANTITY  OF  SERVICE, 
classification,  227. 


QUASI   PRIVATE   POWERS, 
municipal  corporations,  5. 


RAPID   TRANSIT   SYSTEM, 
contract  of  municipality,  13. 
lease  by  municipality  for  operation,  366. 
municipal  ownership.  7,  5S2-585. 
municipal  purpose,  23,  25.  43,  582-585. 
owned   and   leased   by   municipality,   13. 

RATE   REGULATIONS. 

distinguished  from  contracts  of  municipality,  433-436. 

duty   of  municipality,   499-501,   505,   506,   508-510.   513,  514.   618- 

522. 
general   welfare  must  remain   available.  505.  506,  513-618,   622, 

523. 
governmental    and   continuous,   498,   506,   514.  516.   517.   618. 
limited  to  manner  provided  by  statute,  504,  511-521. 
police  power,  518. 

police  power  distinguished.  434-436.  438. 
power   of   municipality   revocable.   512. 
power  of  municipality  statutory.  511-516.  523.  518. 


944  INDEX. 

[References  are  to  Section^.] 

RATE  REGULATIONS— Con^i/med. 

simplified   by   capitalization   coinciding   with   investment,   page 

12. 
suspended  by  contract,  424,  426,  436,  437,  498,  502-505,  511-517, 
519-523. 
RATE   REGULATIONS   AND   CONTRACTS   FIXING   RATES, 
power  of  municipality,  503-505,  510-522. 

RATE    REGULATIONS    BY    MUNICIPAL    CORPORATIONS, 
personal  and  continuous,  419. 

RATE    REGULATIONS    OF   MUNICIPAL    PUBLIC    UTILITIES, 
continuous,  498,  506,  514,  516,  517,  518. 

RATES, 

concessions  for  charities  and  public  service,  223. 

contract  of  municipality  fixing,   499,  500,   503-506,   508,   510-512, 

515-523. 
contract   of  municipality   for   street  privileges,   420-438. 
contractual  power  of  municipality,  97. 
cost  of  service,  446,  447,  451,  452,  454,  456. 
cover  meter  rentals,  528-535,   539. 
cover   service  pipes,   528-530,   536-538,   540. 
demand  and   supply  capacity,   454. 
depreciation    or    obsolescence,    456,    460,    466-470. 
determined    by   valuation,    475,    476,    484,    486-491,    494. 
discretion    of   municipal    officers,    440,   441,    450. 
effect  of  reduction   on  income,   456,   457,  463,   470,  492. 
elements    constituting    reasonableness,    456-474. 
enforcement  of  rights   of  municipality,  pages  6-12. 
expense  of  operation  and  maintenance,  456,  457,  459,  460,  466- 

471. 
fixing   is   legislative   and    administrative,   440-442,   445,   448. 
going  concern,  462,  471,  472,  473,  474. 
good  will,  461,  471,  472. 
governmental  and  control  continuous,  152. 
how    fixed,    439-442,    449-451. 
improved    service    or   reduction    in    charges,   456,   457,    463,    470, 

492. 
includes  meter  service,   452. 
investment  of  municipal  public  utilities,  456-458,  461-463,  471- 

474. 
municipal   ownership,   575-579. 
municipal  ownership  compared  to  private,  449. 
municipal   public   utilities,   572,   576. 
municipal  regulation  by  franchise,  page  6. 


INDEX.  945 

[Keferencea  are  to  Sections.] 

RATES— Continued. 

no  discrimination.  210.  212.  213.  215.  21S,  219.  221  223.  225  229. 

police  power  of  municipality,  97.  102. 

power  of  municipal  officers  to  fix,  425. 

power   of   municipality   to   regulate   statutory,   page   6. 

power  of  state  delegated  to  municipality.  418.  424.  439  441,  498- 

500.  502-509.  512  523. 
public  regulation  and  control,  page  5,  6. 
public  utility  commission   power  to  fix,  439-442. 
reasonable  return  on   fair  valuation,  475,  476,  484.  489-493. 
reasonableness  a  judicial  question.  442.  444-451. 
reasonableness  defined   and   determined,   455-474. 
reasonableness  presumed.  442,  446.  447.  449.  450. 
reasonableness  the  test  and   limitation.  439,  441.   442.   444,  446- 

454. 
rebates  illegal,  221. 

regulated   by   state   public   utility   commission.   603-606.   608-612. 
regulation  and  control  alternative  to  ownership,  page  4. 
regulation    and    control    of    municipal    public    utilities,    416-438. 
regulation    by   municipality   for   inhabitants.   198,    199,   201,   202. 

205,  206. 
regulation  by  public  utility  commission,  pages  9.  10.  12.  S9  596- 

601. 
regulation   by  state  under  police  power,  611. 
regulation    governmental    and    continuous,    418.    419.    441,    445, 

49S,   506,  514,   516-518. 
regulation   of   uniformity   strictly   enforced,   586,   589.   597.   598, 

599. 
right  of  municipality  to  regulate,   152,   153,  158,  162. 
right  to  fix.  416-438. 
sliding  scale.  457.  463. 
taxes  distinguished.  222,  223. 
telephone    service.   548.   549.    571. 

telephone   service   increased   by   competition.   547,   548.   549. 
telephone  service   peculiar,  463.   470. 
value  of  service,  444.  451,  453.  454.  456.  465.  493. 
water-works  liability  for  fire  loss.  256.  257,  258,  261. 

RATES  AS  VESTED  INTERESTS. 

limitation   of  constitutional   protection,   497. 

REAL   PARTIES   IX   INTEREST. 

inhabitants  of  municipality.  196.  198.  199.  201,  202.  106.  107. 

REASONABLE   RATES. 

defined  and  discussed.  455-474. 
60— Pub.  Ut 


946  INDEX. 

[References  are  to  Sections.] 

REASONABLE   RATES— Continued. 
elements  constituting,  456-474. 
how  deternained,  455-474. 
investment  of  municipal  public  utilities,  456-458,  461-463,  471- 

474. 
limitation  of  power  of  municipal  public  utilities,  439,  441,  442, 

444,   446-454. 
presumption  in  favor,  442,  446,  447,  449,  450. 
question   of  fact,  455. 

REASONABLE    REGULATIONS, 

franchise  provisions,  530,  535,  536,  539,  543-545. 

REBATES, 
illegal,  221. 

RECOVERY  FOR  FIRE  LOSS, 

inhabitants  of  municipality,  236,  249,  250-252,  259,  262,  263. 

REGULATION  AND  CONTROL, 

alternative   and   preventive   of   municipal   ownership,    572,   576- 

579. 
alternative  to  municipal  ownership  if  adequate,  page  4. 
consent  of  municipality  to  use  of  streets,  389-393,  404-406,  408. 
governmental  and  continuous,  498,  506,  514,  516-518. 
municipal  corporations,  498-523. 
rates,  416-438. 

RENEWAL  OF  FRANCHISE, 

municipal  public  utilities,  383,  385,  388. 

RENTAL   CHARGES, 

municipal  public  utilities,   524,   528-535,   539. 

RENTAL   PAYMENTS, 

municipal  public  utilities,  70. 

REPRODUCTION   COST, 

valuation  of  investment,  477,  479,  485,  487,  493,  496. 

REPRODUCTION   OF   MUNICIPAL   PUBLIC   UTILITIES, 
valuation  reduced  by  depreciation,  469,  470,  472. 

HEVENUE    PAYMENTS, 

municipal  public  utilities,  75,  76,  77,  82. 

RISK  OF  INVESTMENT, 

rates  of  municipal  public  utilities,  443,  454,  456,  458,  461,  464, 
465,  471-473. 


INDEX.  947 

[References  are  to  Sections.] 

S 

SALE  OF  MUNICIPAL  PROPERTY, 
nonpayment  of  taxes,  336. 

SALE  OF  MUNICIPAL  PUBLIC  UTILITY  PROPERTY, 

statutory  authority  necessary,  348,  350-354,  361,  362,  367. 

SALE  OF  PROPERTY, 

providing  municipal   public   utilities,   121,  346-367. 

SALE  OR  ALIENATION, 

property  of  municipality  used  for  commercial  or  governmental 
purposes,   page   5. 

SERVICE  OF  MUNICIPAL  PUBLIC  UTILITIES, 
classified,  213,  216.  218-229. 

contract   of   municipality,   144-151,   153-155,   162-166. 
discrimination.   20S-229. 
discrimination  from   location,  544. 
enforcement   of   rights   of   municipality   necessary   If   adequate, 

pages  6-12. 
public   regulation   and   control,   pages  5,   6. 
regulation  and  control  alternative  to  ownership,  page  4. 
regulation  by  public  utility  commission,  pages  9.  10,  12. 
strict  enforcement  of  franchise  and  contract  rights,  5S6-60L 

SERVICE  PIPES, 

municipal  ownership,  528,  529,  530,  538,  540. 
municipal   public  utilities,  .528,  529,  530,  536-538,  540. 

SEWER   SYSTEM, 

implied  powers  of  municipality.   40. 

SHADE    TREES, 

municipal  public  utility,  203.  204. 

SLIDING  SCALE, 
rates,  457.  463. 
standard  of  service,  457.  463. 

SPECIAL   ASSESSMENT   FOR   MUNICIPAL   PUBLIC   UTILITIES 
unearned  Increment,  540. 

SPECIAL  ASSESSMENT  OF  ABUTTING  PROPERTY  OWNER, 
municipal  public   utilities,  540. 

"SPECIAL    ASSESSMENT"    PAYTVIENTS. 

municipal  public  utilities,  7S,  79. 


948  INDEX. 

[References  are  to  Sections.} 

SPECIAL    FUND    PAYMENT, 

municipal  public  utilities,  74-79,  83,  85. 

SPECULATION   IN   FRANCHISES, 

discouraged   by   strict   construction,   137,   138,   140. 

SPHERE    OF   MUNICIPAL   ACTIVITY, 

attitude  of  courts  extending,  page  3,  §§  13,  18,  23,  24,  29,  31,. 
33,  35,  37,  38,  43,  44,  49,  51-55,  64,  316,  346-348,  352,  355,  356, 
359-361,    428,    578-585. 

STATE, 

agency  of  municipality,  5,  7,  127,  128,  134,  135,  190,  193,  265, 
270,   275,   390-392,   398-400,   402,   439-442,   481,   573-575. 

capitalization  and  expenditures  of  municipal  public  utilities, 
605. 

constitutional    limitation    of    franchise   grants,    167. 

control   of  municipal   public  utilities,   415,   416,  417. 

control  of  streets  delegated  to  municipality,  392,  394,  398-406,. 
409,   410,   412,   413. 

delegation  to  municipality  of  street  franchises,  88,  90,  101,  102, 

expenditures  of  municipal   public  utilities,  605. 

franchise  or  charter  grants,  88,  89,  90. 

municipality   as  an   arm   of  sovereignty,  7. 

power  of  regulation  delegated  to  municipality,  page  4. 

power  to   grant   perpetual   franchises,   167,   174,   175,    188. 

public    utility    commissions,    602-612. 

regulation  and  control  alternative  to  ownership,  page  4. 

regulation  and  control  of  municipal  public  utilities,  page  3. 

regulation  and  control  of  municipal  public  utilities  as  monop- 
olies, pages  5,  6. 

regulation  of  municipal  public  utilities,  408,  409. 

regulation  of  municipal  public  utilities  supplants  competition, 
603-610,    612. 

taxation  of  municipal  public  utilities,  317,  318,  319. 

STATE   PUBLIC   UTILITY   COMMISSIONS, 

necessary   for   municipal   public   utilities   interurban    in    scope, 

602,  603,  612. 
rate   regulation,    603-606,   608-612. 

regulation  and  control  of  municipal  public  utilities,  602-612. 
supplement  commission   of   municipality,   602,   603,   612. 

STATE  REGULATION  AND  CONTROL, 

capitalization   of  municipal   public   utilities,   481-483. 
competition  supplanted,  603-610,  612. 
protection  of  consumer  and  investor,  605. 
telephone  service,  546-571. 


INDEX. 


[References  are  to  tieetwna.] 


949 


STATUTORY   POWER  OF  MUNICIPAL   CORPORATIONS, 

authorizing  alienation  of  municipal  public  utility  property,  348, 

350-354.   361,   362.   367. 
rate  regulation  strictly  construed,  504,  511-521. 

STATUTORY    PROVISIONS   FOR   TAXATION, 

municipal  public  utilities,  320,  321.  329,  330,  335,  337,  338. 

STEAM   RAILROAD. 

powers   of   municipality,   34. 

STEAM.    STREET    AND    INTERURBAN    RAILWAYS, 

distinguished  as  additional  servitudes,  298,  299,  283,  315. 

STOCKS  AND  BONDS, 

rates,  481-483,  485,  488,  493. 

safe-guarded  by  capitalization  coinciding  with  Investment,  page 
12. 

STREET   FRANCHISES, 

consent   of   municipality,    389-393.    404-406,   408. 

duty  of  municipal  officers,  391-394,  402-404.  409,  410,  413. 

municipal   public  utilities,   61. 

power  of  municipality  delegated  by  state.  88-93,  96,  97.  101,  102. 

STREET    RAILWAY, 

control  of  municipality,  527. 

STREETS, 

change  of  grrade,  410,  413. 

consent   of   municipality   and   rate   regulation,   420-438. 

contract   of   municipality   to   obstruct,   541. 

contract  to  open  and  maintain.  3. 

control  of  municipality  continuous,  122.  124.  129.  130,   131.  134, 

137. 
control   of  municipality  delegated.   117. 
control  of  municipality  referred  to  court.  101. 
dedicated   for  public  transportation   and   communication,  S9. 
franchise  of  state  may  be  perpetual.  167.  174.  175.  188. 
franchise  rights  of  municipal  public  utility,  88,  89. 
franchises  to  use  strictly  construed,  137.  141,  142. 
key    to    regulation    of   municipal    public    utilities.    3S9-394,   398, 

404,   407,  40S. 
liability  of  municipality.  272. 

municipal    control    continuous,    394-397.    402.    406.    409-413. 
municipal  control  delegated  by  state,  392.  394.  39S-406,  409.  410, 

412,   413. 


950  INDEX. 

[References  are  to  Sections.] 

STREETS— Continued. 

municipal   control   of   franchise,   91-93,   101-103. 

municipal  corporations,  61. 

municipal  franchises  not  perpetual  by  implication,  168-170,  172, 

175-182,   184,   185. 
municipal   public  utilities,   389-413. 
municipal   public   utility   equipment,   524-527,   536,   537,   540-542, 

545. 
municipality  trustee  for  public,  402,  403. 
negligence  of  municipality,  9. 

obligation  of  municipal  franchises,  193,  194,  199,  203,  204. 
public  purposes  must  not  be  obstructed,  524-527,  541,  542,  545. 
public  uses,  524,  526,  527,  541,  542. 
purposes   of  transportation   and   communication,   390,   393,   395, 

398,  402,  403,  406,  410. 
rentals  of  municipal  public  utilities,  524. 
sewer  system,  411,  412,  413. 

STREETS  AND  BOULEVARDS, 
distribution  of  cost,  67. 

STREETS  AND   HIGHWAYS, 

compared  and  distinguished,  285,  296-298,  309,  310. 

control   of  state  absolute,   117. 

equipment   of  municipal   public   utilities   additional   servitudes, 

277,   279-315. 
public  purposes  of  municipal  public  utilities,  278-280,  284,  294, 

307,  308. 
transportation  and  communication  uses,  278-295. 

STREETS  AND  HIGHWAY  USES, 

limited  by  dedication,  302-304,  312-315. 

local   not  additional   servitude,  281-284,  286,  292,  294,  295,  297, 

298,   301,   305,   306. 
not  limited  by  dedication,  278-280,  290,  294,  295. 

STREETS  AND   INTERURBAN   RAILWAYS, 
additional  servitude,  303,  304,  309,  315. 
no  additional  servitude,  282-284,  289,  294,  297-299. 

SUBROGATION, 

water-works  for  municipality,  254,  259. 

SUBURBAN   CUSTOMERS, 

classification  for  service  and  rates,  226. 

SURPLUS  CAPACITY, 

contract  of  municipality,  15. 


INDEX.  951 

[References  are  to  Sections.] 

SURPLUS  CAPACITY  OF  MUNICIPAL  CORPORATIONS. 

contract  for  lease  or  sale,  58,  62. 
contract  to  remove  water  from  boat,  15. 
temporary  and  incidental  use,  15. 

SURPLUS    CAPITALIZATION, 
purpose,  482, 

SURPLUS  WATER  SUPPLY, 

contract  of  municipality  to  sell,  100. 

SUSPENDING   POWER   TO   REGULATE   RATES, 

contract  strictly  construed,  498,   502-505,  511,  513-518,  520.   523. 


TAXATION, 

exemption  for  public  purposes,  319-322,  324-327,  331. 
exemption    of   municipal    property    providing   municipal    public 

utilities,  316,  319,  321-345. 
federal  and  state  constitutional  provisions,  317,  318,  319. 
municipal  or  public  purposes  the  limitation,  55,  56,  61,  62,  63. 
municipal   property  used   for  governmental   purposes,  319,   320. 
municipal  purposes,  65. 
property  of  municipality  used  for  commercial  or  governmental 

purposes,  page  5. 

TAXATION  AND  SALE  OF  MUNICIPAL   PUBLIC  UTILITIES, 
municipal  ownership  and  operation,  page  3. 
municipal  regulation  and  control,  page  3. 

TAXATION  OF  MUNICIPAL  PUBLIC  UTILITIES, 
constitutional   provisions,  316,  317,  318,  319. 
power  of  state  and  federal  government.  317,  318,  319. 
statutory  provisions.  320,  321.  329.  330.  335,  337.  338. 

TAXPAYERS, 

recovery   against   water-works  for   fire   loss,   239.   262. 

TELEPHONE   SERVICE, 
classified.  556.  570.  571. 

cost  increased  by  competition.  547,  548.  549. 
cost  increases  with  number  of  subscribers.  555.  569,  570. 
exclusive  if  necessary.  563,  564. 

public  regulation  and  control   especially  necessarj-.  546-660. 
public  utility  commission.  550. 
rates.  463.  470.  548.  549,  571. 
rates  increased  by  competition,  547,  548.  549. 


952  INDEX. 

[Referefwes  are  to  8ections.'\ 

TELEPHONE  SBRYICE— Continued. 

regulation  by  competition  inadequate,  546-549,  557,  568. 
value  increases  with  number  of  subscribers,  555,  570. 

TELEPHONES, 

additional  servitude,  300,  302,  312,  313. 

common   switchboard   of  separate  plants,   551-554,   557,   562. 

communication  in  lieu  of  transportation,  278-280,  284,  288,  289, 

292,  294,  295. 
competition   extravagant   and   unsatisfactory,   546-549,   557,   568. 
complicated   and  difficult  to  understand,  550,   555. 
contract  for  through   service,  559,  560,  563,  564,  568. 
doctrine  of  increasing  cost  of  service,  569,  570. 
duplicated  service  extravagant  and  unsatisfactory,  546-549,  557, 

568. 
facts  peculiar  to  service,  546,  549,  555,  556,  560,  567-570. 
natural   monopolies,   547,   548. 
no  additional  servitude,  278-280,  284,  288,  289,  292,  294,  295,  305, 

306,  310,  311. 
party-line  restriction,  543. 
physical  connection  of  competing  plants,  546,  551,  553,  554,  557- 

562,    565-568. 
rates  increased  with  service,  463,  470. 
regulations  for  rendering  service,  546-571. 
state  regulation,  546-571. 

THEORIES   OF   VALUATION, 

defined  and  discussed,  477-480,  484-491,  493-496. 

TOWNS, 

See  Municipal  Corporations. 

TRESPASSER, 

competitor  may  exclude,  143. 
municipal  public  utilities,   374,   385,   386. 

TRUST   PROPERTY   OF   MUNICIPAL   PUBLIC   UTILITIES, 

limitation  on  alienation  statutory,  348,  350-354,  361,  362,  367. 

TRUSTEE, 

municipal  public  utilities,  348-352. 
municipality  of  streets  for  public,  402,  403. 

TWO   CAPACITIES   OF  MUNICIPAL   CORPORATIONS, 

liability  for  negligence,  264-268,  273-276. 


INDEX.  953 

[References  are  to  Sectiona.] 

U 

UNEARNED   INCREMENT   OF   MUNICIPAX,   PUBLIC   UTILITIES, 
special  assessment,  54U. 

"USED   AND   USEFUL"   PROPERTY    IN    RENDERING   SERVICE, 
municipal  public  utilities,  476,  478,  480,  482,  484,  491,  492,  498, 
494. 

USES  OF  STREETS  AxND  HIGHWAYS. 

public  purposes,  278,  279,  280,  284,  294,  3o7,  308. 


VACANT   ROOMS    OF   MUNICIPAL   CORPORATIONS, 

contracts  for  lease.  15. 

VALUATION   OF   LWESTMENT, 

municipal   public   utilities   must   be   fair,   456-458,   461^65,   471- 

474. 
municipal  public  utility  property,  475-496. 
net  earnings  rule,  477,  485,  495,  496. 
original  cost.  477-479,  490,  493,  494. 

outstanding   capitalization.   477,   480-485,   487,  488,   490,  493. 
physical  and  present,  489,  490. 
present  value,  476-4S0.  482,  484  487,  489-494. 
reproduction  cost,  477.  479,  485,  487,  493,  496. 
theories  defined   and   discussed,   477-480,  484-491,   493  496. 

VALUATION   OF   MUNICIPAL   PUBLIC   UTILITIES, 

basis  for  fixing  rates  or  purchase  price,  475,  476,  484,  486,  491, 

494. 
reproduction  Ignores  going  concern  value,  473,  474. 
reproduction  less  depreciation,  469.  470,  472. 

VALUE   OF  SERVICE. 

not  valid  basis  for  classification,  218,  229. 
reasonableness  of  rates,  444,  451,  453,  454.   456,  46'..  493. 

VALUE  OF  TELEPHONE  SERVICE. 

increases   with   number   of  subscribers,   55.'),   57o. 

VESTED   RIGHTS. 

protected   against  undue  exercise  of  police  power,  438. 


WAIVER   OF    FORFEITURE, 

municipal   public  utility   franchises,  378. 


954  INDEX. 

[References  are  to  Sections.] 

WASTE    OF    SERVICE, 

meters,  528,  531,  535,  539. 

WATER  SUPPLY, 

contract  of  municipality,  12. 

WATER-WORKS, 

contract  of  municipality,  5,  9,  11,  13. 

contract  of  municipality  to  purchase,   6. 

exemption  from  taxation  for  public  purposes,  327,  330,  331. 

liability  for  fire  loss,  230-263. 

liability  limited  to  ordinary  use,  276. 

liability  of  municipality,  267,  271,  272,  275,  276. 

municipal  liability  for  defective  operation,  3. 

municipal  purpose,  20,  45. 

not  insurer,  242,  249. 

sale  of  plant  on  failure  of  supply,  357. 

subrogated   for  municipality,  254,  259. 

WATER- WORKS  AS  PROTECTION  AGAINST  FIRE  LOSS, 

governmental  duty  and  no  liability,  234,  249,  253,  254,  255,  25».- 

WATER-WORKS  LIABLE   FOR  FIRE  LOSS, 
rates,  256,  257,  258,  261. 

WELFARE   OF  MUNICIPAL   CORPORATIONS, 
contracts  unlimited,  11. 


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